With Northampton Tenants Deposits Totalling £20,418,683, how will ‘Lifetime Deposits’ Change the Northampton Rental Market?
The Government’s scheduled publication of their White Paper for the Renter's Reform Bill, which incorporates proposals to forbid Section 21 evictions and introduce ‘Lifetime Deposits’, has been suspended until 2022.
The additional time is required to give a chance to create a level playing field to reforms for both landlords and tenants in the private rented sector in England.
In this article, I want to look at these lifetime deposits. How could the Lifetime Deposit Scheme work, and how could they benefit both Northampton landlords and Northampton tenants?
When a tenant moves between rented homes, they need the deposit for their new home before being released from their old home.
The average deposit for a Northampton rented home stands at £1,283.
This means finding that amount of money at the time of moving home can be difficult for many tenants; thus, they become stuck in their existing rental.
Therefore, Westminster wants to propose in this White Paper a new deposit choice for tenants. A deposit is transferred from the old landlord (letting agent) to the new landlord (letting agent), thus making life simpler as the tenant doesn't need to save for an additional new deposit every time they move home.
Now, of course, it's vital that any new ‘deposit scheme’ does not dissuade Northampton landlords from making valid claims for damage to properties. Landlords cannot be expected to give up their right of recourse to a security deposit until such time that they are satisfied there will be no need to claim it.
So how would Lifetime Deposits work?
There would need to be some form of system safeguarding that the new Northampton landlord is protected by a whole deposit, even if the deposit on the old Northampton home comes into dispute.
This will be critical and central to Northampton landlords having conviction in the Lifetime Deposit Scheme. That could be something like an interest-free loan for the tenant on the crossover between the properties.
Another advantage to the scheme is that ‘lifetime deposits’ could be used for tenants to build a deposit for a house for the future.
What about the existing system of deposits?
The rules regarding the amount of deposit held by a Northampton landlord were changed a couple of years ago, where only five weeks’ worth of rent can be held as a deposit.
The deposits Northampton tenants have had to save for certainly raises the cost of renting a Northampton home.
Some say this extra burden puts another nail in the coffin of the dream of homeownership for many Northampton renters. To give you an idea of the level of deposits held for Northampton rental properties…
The total of all the tenants’ deposits in Northampton is £20,418,683.
Yet the other side of the argument contends that if the Northampton tenant misses more than one month’s worth of rent, the landlord is immediately out of pocket, even before they’ve got the costs of solicitor and any improvement works from the tenant trashing the place.
Does a deposit of just over one month provide Northampton landlords with a decent level of protection against unpaid rent or damage to the property? When you consider…
The total value of all the privately rented properties in Northampton is £4,483,863,072.
Before I conclude my thoughts to the initial question of ‘lifetime deposits’, the need for decent landlord insurance to ensure you are adequately covered as a Northampton landlord is vital.
So, what are my thoughts on ‘Lifetime Deposits’?
It is my opinion the common need for Northampton tenants to stump up a ‘two-fold deposit’ is not helping many Northampton renters when it comes to moving home. It’s clear the standard cash down deposit is not fit for purpose for the 21st Century.
One might suggest the Government’s quest for the ‘lifetime deposit’ could open the door to other deposit alternatives that have come onto the market for tenants in the last few years.
Some landlords don’t require a deposit yet are compensated by asking the tenant to pay a higher rent to cover the risk. Also, there are companies that offer insurance backed deposits where the tenant pays one week's rent to an insurance firm, and the insurance firm pays out if a loss is incurred by the landlord.
Interestingly, other countries are already offering deposit loans and guarantee schemes. Could this be something for the British Government to contemplate?
We must wait until at least the spring of 2022 for the Renter’s Reform White Paper to be published. Then every stakeholder involved (tenants, landlords and agents, et cetera) can look at it in the cold light of day and decide how this will affect the way they view the landlord/tenant/agent relationship.
Many will say the bigger issue isn’t ‘Lifetime Deposits’ in the White Paper, but the removal of no-fault Section 21 evictions. The removal of Section 21 is something the current Government have pledged to bring in during this parliamentary cycle (i.e. before Q4 2024).
I am not concerned about removing no-fault Section 21 evictions, but what will replace it to ensure there is suitable redress for landlords if the tenant doesn't pay the rent?
Of course, a handful of Northampton landlords will decide to sell their rental portfolio because of the White Paper. The same happened in 2016 when the increase in landlord taxes were announced.
However, this will reduce the supply and availability of Northampton rental properties, meaning rents will rise (classic textbook supply and demand), thus, landlords return and yields will rise.
Yet, because tenants still can’t afford to save the deposit for a home and we are all living longer, the demand for rental properties across Northampton will continue to grow in the next twenty to thirty years. The reason being we are still not building enough homes to accommodate our growing and ageing population. This means we will turn to more European ways where the norm is to rent rather than buy in their 20s and 30's.
This means new buy-to-let landlords will be attracted into the market, buy properties for the rental market in Northampton and enjoy those higher yields and returns. Isn't it interesting that things mostly always go full circle?
Is the Northampton Property Market
Running Out of Steam?
In recent articles on the Northampton property market, I have been talking a lot about house prices over the last 12 months and 5 years in Northampton.
When it comes to newspapers talking about the property market, the headline most people look at is what is happening to house prices.
However, as 2 in 3 (65.1%) of Northampton home sellers are also home buyers, the price is almost irrelevant. Let me explain.
If your property has gone down in value – the one you want to buy has also gone down in value – so you are no better or worse off (and if you are moving up market – which most people do when they move home – in a suppressed property market the gap between what yours is worth and what you will buy gets lower … meaning you will be better off).
Many property commentators (including myself) consider a better measure of the health of the property market is the transaction numbers (i.e. the number of people selling and buying).
Let’s take a look at the numbers for West Northamptonshire as a whole (including Northampton).
The average number of properties sold in Q1 (Jan/Feb/March) between 2008 and 2020 was 438 properties per month, whilst Q1 in 2021 saw 639 properties sell on average per month (boosted by the March stats where an eye watering 826 homes sold). This meant…
46% more houses sold in the Northampton area in Q1 2021 than the 14-year average
The average number properties in Q2 (April/May/June) between 2008 and 2020 was 504 properties per month, whilst Q2 in 2021 saw only 406 properties sell on average per month, meaning…
19.4% less houses sold in the Northampton area in Q2 2021 than the 14-year average
Finally, whilst the Land Registry won’t be publishing the exact stats for Q3 2021 for our local authority for a couple of months, I can make certain calculated assumptions from the national data published by HMRC. The number of property sales for our local authority area in Q3 (July/August/September) between 2008 and 2020 was on average 560 properties per month. However, using the HMRC data, I calculate there will only be 414 properties sold on average per month in Q3 2021. This means…
25.9% less houses sold in the Northampton area in Q3 2021 than the 14-year average
One of the two main drivers of activity in the housing market in the latter half of 2020 (meaning Q1 figures were better than the long-term average) was the battle for space, with many Northampton buyers seeking larger properties to work from home. The second was the short-lived tax relief measures such as the cut to Stamp Duty meaning property prices were at an all-time high.
But what also might surprise you is the number of people buying for the first time.
1 in 4 mortgages since lockdown have been for first-time buyers (25.12%)
Northampton first-time buyers, buoyed by parental help with their deposits, the Government’s 5% deposit mortgage and ultra-low borrowing costs, have also helped to push house price growth since the start of 2021. In fact, if you split down house price growth between second-time (third-time, etc.,) buyers and first-time buyers, the national annual house price inflation for first-time buyers is 9.2% compared to 8.1% for the second or third buyers.
Yet, the Q2 and Q3 2021 Northampton property market was worse than the long-term Northampton average (in terms of property transactions)
The question is – should we be worried?
The UK economy continues to deliver a benevolent framework to the British housing market.
The labour market has outstripped expectations with the millions expected to join the dole queue at the end of furlough failing to materialise and with the number of job vacancies on the rise.
Of course (and I mentioned a lot in my recent posts), the Bank of England is projected to increase interest rates to dampen inflation in the coming months, with further small rises predicted over 2022, so I do expect the demand for property to cool off as mortgage borrowing costs increase.
Normally such rises in mortgage costs would mean less property would sell, yet nothing over the last couple of years has been normal.
Many Northampton property homeowners have held back putting their property on the market in the last 6 months because they were afraid they would sell their own home but not find another to buy – thus making them homeless (nothing could be further from the truth – yet that is what a lot of people incorrectly believe).
If the Northampton property market slows and interest rates rise, mortgage costs will still be very low by historical standards.
Also, if the obstacle of raising the 5% deposit can be overcome by first-time buyers plus a confidence that existing homeowners won’t be made homeless because of a cooling property market, many more people could be tempted to enter the property market by placing their property for sale first…
… thus, opening up the market to more buyers - which in turn will drive up transaction numbers back to their normal 14-year average. However, raising a deposit is likely to remain the primary obstacle for many.
If you are a Northampton homeowner or Northampton first-time buyer and want my thoughts on the future, then please do drop me a line.
2022 is going to be an interesting year ahead for the Northampton property market - only time will tell if this will be a brief respite or is it running out of steam?
Please tell me your thoughts on what you think will happen.
Has Buy-to-Let Changed the Northampton Property Market?
The ‘Buy-To-Let’ (BTL) mortgage is celebrating its Silver Anniversary (25 years) this autumn.
Isn’t it fascinating that a decision between a group of letting agents and bankers all that time ago to offer BTL mortgages has changed the face of the Northampton (and national) property market?
But has it been a good thing? Or has it ruined the dreams of many 20 somethings wanting to get on to the property ladder in the last couple of decades?
Let’s look deeper at the whole story, then I will let you, the reader, decide.
And as soon as the BTL mortgage was launched, it was clear there was an enthusiasm and a need for this mortgage product. So much so the size of the Northampton private rented sector has grown exponentially.
According to my analysis …
there are 15,921 private rented homes in Northampton, worth £4,483,863,000.
So now we are in 2021, it seems farcical that banks and building societies once thought that properties rented out to private tenants would not create a steady income or increase in value, yet this thought was conventional back in the 1990’s.
It’s no wonder buy-to-let landlords have been given a hard time, with numbers like this.
Yet before we burn every landlord at the stake, let’s just look at the background story.
The Conservatives introduced the right of a council house tenant to buy their own council house in the early 1980s. Fantastic news for council tenants, yet when a council tenant bought their home, that meant that council housing was taken away from future generations to rent and therefore eroding the council housing stock available. Meaning from the mid 1990s/early 2000s, people who would normally be eligible to rent from the council, yet who couldn’t buy, had only one option … rent from a private landlord.
Meanwhile, in the early/mid 1990s we had 15% mortgage interest rates, unemployment rates of 9% and the 1989 housing crash fresh in people’s memories. Repossessions were rife, making home ownership not the most attractive prospect for 20 somethings.
Northampton house prices dropped by 19.4% between 1989 and 1993.
This meant as we entered the mid 1990s, the Northampton property market entered a period of stagnation. There were many Northampton homeowners that bought their home in the property boom of the late 1980s who were disinclined to sell their home for a loss. They were in negative equity (i.e. they owed more than what the house was worth) yet needed to move because of their growing families.
Renting their home out could have allowed them to buy another home for their growing family, but most banks and building societies were still mostly unreceptive to the notion of these homeowners becoming accidental landlords. Most mortgage terms and conditions usually included clauses that prohibited homeowners from renting out their homes.
So, with growing demand from potential tenants, supply reduced from the sale of Council houses and many homeowners in negative equity, all bound up by the semi-deregulation of the private rented sector with the Housing Act 1988 – you can see that the BTL mortgage came along at the right time.
Early take up of BTL mortgages was slow in the first couple of years.
By the Millennium, according to the Council of Mortgage Lenders, there were just over 120,000 BTL mortgages, with a total value of £9.1 billion.
Yet as we entered the 2000s, they really took off, with every man and his dog jumping onto the BTL bandwagon. So much so that today in the UK, there are …
4.4m private rented homes, 2.1m of them with BTL mortgages totaling £234.1bn, which is 11.9% of the UK’s GDP!
That’s more than a 1,650% increase in the number of BTL mortgages to landlords and a 2,470% increase in the value of those BTL mortgages.
Since 2001, the number of privately rented households in the UK has grown from 8.3% to 19%.
On the face of it, you could say with the growth of these BTL landlords with their cheap BTL mortgages and often unkempt properties, it has pushed potential homebuyers into squalor. Yet, let’s look a little deeper.
Most Northampton landlords are very fair with their Northampton tenants providing them with clean, well presented and affordable housing. Of course, there are the rogue landlords but with TV shows such as ‘Landlords from Hell’, the British public are given a distorted and uneven view of private landlords as a whole.
Private sector landlords have played a critical role in providing homes to millions of Brits in this country, let me expand.
The UK population has grown by 405,000 people per year (for the last 20 years), yet only 22,750 council/social houses have been built per year in the same time frame.
If it wasn’t for the private rented sector, who would’ve housed all the extra people in the country over the last 20 years?
What about the exorbitant rents? Would it surprise you that rents have risen below inflation between 2008 and 2019?
Also there has been a drive to tax BTL landlords more comprehensively and regulate the private rented sector to develop better housing conditions for tenants.
Unlike owner-occupier homes, tenants get the benefit of new regulations from Gas Safety Checks and Electrical Safety Reports. Also, BTL landlords will need to improve their Energy Performance Certificate Rating to at least a C rating by the end of 2025 for all new tenancies, and by end of 2028 for all existing tenancies, all at no cost to the tenant and directly saving them money on their heating costs – something that is very important considering the recent rises in gas prices.
Northampton landlords have also had to pay more tax on their Northampton BTL properties, paying 3% Stamp Duty Tax supplement for the last 5 years, and higher rate tax relief on mortgage interest was taken away four years ago.
Landlords have also had to deal with the financial fallout of the pandemic. It is estimated 1 in 5 tenants in the private rental sector have some form of rent arrears.
Interestingly landlords that don’t use a letting agent to manage their property are 272.5% more likely to be 2 months or more in arrears.
Also, evictions for rent arrears were banned during the pandemic, meaning some tenants ran up arrears of 12 months or more. According to the National Residential Landlords Association (NRLA), this has left around 210,000 private tenants in the country facing a court order for rent arrears. That would equate to …
854 Northampton private rented households with a court order for arrears.
The idea that Northampton landlords are middle-class establishment types who are out to take advantage of Northampton tenants who can’t afford to buy their own Northampton homes is, in my opinion, just wrong.
Of course, there are some rogue Northampton landlords, yet there are plenty of rogue tenants. Just because you are a Northampton landlord, it doesn’t mean you are quaffing Champagne and rolling in cash.
2,859 Northampton landlords own just one BTL property.
And just under half of those use their rental income to supplement their pensions, and according to the NRLA, a third of landlords have a gross income (excluding income from the BTL property) of less than £20k per annum.
It’s hard work being a Northampton BTL landlord and I still believe the burden of housing just under a fifth of the UK population isn’t appreciated or taken seriously by Government.
Notwithstanding the challenges, most Northampton BTL landlords are in it for the long run. BTL mortgages can be secured for less than 1% and demand is on the rise (with rents rising at the highest rate for 10+ years). Of course, Brexit caused a few issues with some Northampton landlords losing some Eastern European migrants. Yet once things settle down, we will have an influx of people coming from Hong Kong and Afghanistan, wanting to settle down, get jobs and ultimately require a home to live in, which will be a private rented house.
I know the Stamp Duty Tax holiday has cleared out the Northampton landlords who were on the fence for staying in the private rented sector or selling up, but those Northampton landlords that are left will be more professional and will run their BTL portfolio as a business, not a hobby.
My final piece of advice to anyone thinking of becoming a BTL landlord in Northampton for the first time is that you have to have a strategy and plan ahead. Those who stumbled into the buy-to-let market in the early 2000s made a lot of money without any strategy or tactics.
Moving forward you need the guidance and support of an agent who can tell you the best places for investment, be that for better yield or better capital growth.
They will also be able to tell you what tenants demand to ensure that you attract the right sort of tenants who won’t trash the place and leave you in arrears. If you would like some advice do not hesitate to drop me a line or pick up the phone.
Are Northampton House Prices Set to Fall this Autumn?
The stamp duty tax holiday is over, furlough finished at the end of September, unemployment is due to rise and inflation is rife … is this the end of the post lockdown Northampton property boom?
Surely, we are heading for house price correction?
Forecasting what will happen in the Northampton property market this Autumn may not be as simple as it first appears.
It’s true the Northampton property market is starting to settle down after an all-time number of property deals were completed in June.
More Northampton people will have moved home in 2021 than in any year since 2007, with an estimated 1.5 million home buyers nationally having bought a property.
Roll the clock back to last Christmas, and the Government’s Office for Budget Responsibility, projected that national house prices would drop between 6% and 8%.
By Christmas, the price of the average home in Northampton will be about £291,200 up 10.7% on last Christmas.
Let us not forget there were so many ambiguities at the start of 2021. We were about to start a 5-month lockdown, hospitals were bursting at the seams with patients, the vaccines hadn’t started, 4 in 10 employers had furloughed their staff and we had just had Brexit ... things didn’t look good.
Yet, nothing could be further from the truth 10 months later - the Northampton property market has been on fire. But after a heated summer in the Northampton property market, things certainly can’t carry on as they have been since the end of lockdown.
So, where are we with the Northampton property market as it stands? Taking reference from historical data on the website The Advisory (I would certainly recommend you check it out)…
74% of properties on the market today in Northampton are sold subject to contract (stc).
How does this compare to October 2019 and October 2017?
In October 2017, 53% of Northampton properties were sold stc, whilst in October 2019, 44% of properties were sold stc.
Yet how does that compare to the national picture?
In 2017, 39.72% of the country’s properties for sale were sold stc whilst in 2019, that figure was 38.11%.
Now I love a good league table, so then decided to compare our locality to the rest of the country
So, I chose to look at the NN3 postcode specifically. For information, there are 2,234 postcode districts in the country.
The 2021 sold stats put NN3 in at 247th place in the country, 112th in 2017 and 340th in 2019
… meaning we have improved from the 2019 figures.
As we enter the last 3 months of the year, there are not so many uncertainties as there were at the start of 2021. On the good news front, 49 million Brits have had at least one jab (45m two jabs) and the UK will be the world’s fastest growing advanced economy this year according to the IMF.
Conversely, the furlough scheme ended at the end of September and with energy prices going through the roof, a real shortage of homes for sale (as I have discussed a number of times in recent blogs) and rising inflation on the back of a shortage of raw materials and trained staff, forecasting this and what will happen to Northampton house prices might not be as easy as it seems.
Post stamp duty holiday, it is now recognised that the majority of the demand for people moving home is focused by a profound unhappiness and frustration with the homes we live in, revealed during the first lockdown in 2020.
Buyers (and tenants – so take note Northampton buy-to-let landlords) want space ... in fact, three types of space … and they will pay handsomely for them!
And whilst there is a shortage of properties coming on to the market, demand and supply economics mean…
Northampton house prices should remain relatively stable going into 2022.
The number of properties coming onto the market in Northampton is slowly improving, yet not enough to diminish house values.
Also, don’t forget Northampton first-time buyers still have stamp duty relief all to themselves again and mortgages are cheap. At the beginning of the 2020 lockdown (spring 2020), mortgage providers removed their higher risk 5% deposit mortgages for fear of a housing market crash. Currently, the vast majority of these low 5% deposit mortgages are back, together with the Governments own 5% deposit mortgages.
Yet many Northampton homeowners are concerned about inflation and its effect on their mortgage payments.
Inflation is important because if inflation gets too high, the Bank of England will need to raise interest rates to reduce inflation. Because mortgages payments are based on the bank of England interest rate, higher mortgage payments will affect what people can afford. Normally the higher the mortgage rate, the less likely house prices are to increase (and in fact if interest rates are too high, house prices will fall).
Whilst I can’t give you advice, with the Bank of England base rate at a 300-year historic low of 0.1%, I’m still surprised that nearly 3 in 10 Northampton homeowners with mortgages are not on a fixed rate mortgage. There has never been a better time to get a fixed rate mortgage, as there are deals out there with interest rates as low as 1%. This means even if interest rates do go up in the short term, you will be protected from higher mortgage costs. Anyway, back to inflation.
Inflation did rise quite quickly and steeply in 2008/9 but came back down within a year.
This was because of a shortage of staff and raw materials during the Credit Crunch of 2008/9, the very same issues we’re experiencing at the moment in Q4 2021. The type of inflation (yes, there are types of inflation!) in 2008/9 was called ‘push inflation’. Whilst inflation is not great, ‘push inflation’ could be described the better type of inflation (as long as is it doesn’t go on for too long).
The economic crippling hyper-inflation seen in the 1970s was ‘pull inflation’. The circumstances that create ‘pull inflation’ are not being experienced at the moment in the UK. This is good news because ‘pull inflation’ is bad inflation, which in turn would create massive problems to the UK economy as a whole.
Therefore, whilst inflation will probably rise to 4-5% by Christmas, I don’t believe the Bank of England will raise interest rates substantially as the message we are hearing from them is they see this as a short-term blip.
Opportunities for Northampton buy-to-let landlords?
Ultra-low mortgage rates and a booming rental market is encouraging more Northampton buy-to-let landlords to expand their rental portfolios, yet their strategy is changing. Yields are increasing as there is a shortage of rental properties, driving up rents. Also, there are Northampton landlords looking to exit the rental market, often because they want to liquidate their portfolio for retirement. These portfolios don’t make it onto Rightmove and get sold ‘off market’.
Therefore, if you are a serious Northampton buy-to-let landlord and you’re looking to expand your own portfolio, it’s really important to put yourselves on the mailing list of estate agents and also build up great one-to-one relationships with the same agents to ensure that you’re at the front of the queue for these off market rental portfolios and not at the back.
To conclude, nobody knows the answer to what will happen to the property market in Northampton as we go into 2022. There are many factors that could affect the market in a positive and negative way, yet buying property is always a long-term investment (be it for yourself or to rent), so if you need any advice or opinion on what you should do, drop me a line or pop into the office and we can discuss the options you have over a cup of coffee.
Northampton Homeowners to be Made Homeless?
The number of properties for sale in Northampton has fallen by 43% since this time two years ago (October 2019). One of the reasons is that many Northampton buyers feel overwhelmed and fearful they will be made homeless if they sell their home and can’t buy another. So, I have decided to look again at the facts and give them to you in greater detail in this article.
My research has found the number of Northampton properties for sale started to decline last autumn (2020).
Nationally, the same story is being written as the average UK estate agency office now has around 16 properties on their books to buy, compared to 43 a couple of years ago.
So why is this an issue? Many Northampton homeowners are wanting to move home and are worried they will put their current home on the market, it sells quickly and then be unable to find another home to buy – thus they believe they will then be making themselves homeless.
The fact is that most Northampton home buyers need to sell before they can buy their next home, meaning they need to place their property on to the Northampton property market before they can buy their next home.
Yet because of the low supply of properties for sale and the current high demand, there is an imbalance in the Northampton property market. This means some Northampton house sellers are nervous to put a ‘for sale’ board outside their house.
So, let me look at the Northampton numbers in greater detail. According to the three main property portals (Rightmove, Zoopla and On-The-Market) …
In October 2019, there were 1,736 properties for sale in Northampton. Today, there are only 986 properties for sale, a reduction of 43%.
When I break it down into bedroom numbers and type it gets even more interesting (note things like building plots and part commercial/part residential etc., won’t be in these numbers so the stats below won’t precisely match up to those above).
.. and when I looked at the type of properties ... it got even more interesting …
As you can see, there have been some interesting changes in the number of properties on the market in Northampton over the last few years, depending on the type and the number of bedrooms, yet most types of housing are down considerably.
So, if Northampton homeowners do sell, will they be made homeless if they can’t find their next ‘forever home’?
The answer is quite simply ... NO!
Northampton properties are coming on to the market all the time, yet the buyers have got to be in the game, in it to win it so to speak. If you keep looking at properties, without even having your property on the market, let alone sold (subject to contract), then you will fall into a self-fulfilling prophecy of not being able to buy another home and will always be chasing your tail.
And it’s those magic words of “subject to contract” that are your get out of jail card.
The average time taken from agreeing a sale to it being legally binding (i.e. exchange of contracts) is about 19 weeks.
During those 19 weeks, you are ‘sold subject to contract, which means you have four or five months to find your new home and the likelihood of not finding your next forever home is very small.
And even if you can’t find anywhere, you will never be homeless as the sale is not legally binding until you exchange contracts, so you can withdraw from the sale up to that point, without penalty.
One final word of advice to all Northampton home movers.
Around 6 in 7 Northampton homebuyers could have missed their ‘forever home’ in 2020/21.
Let me explain, in a study of various UK estate agents 84.8% of homebuyers were not on the estate agent's mailing list before they contacted the agent to view the home according to Denton House Research.
Yes, 6 out of 7 buyers (84.8%) waited until the property came on to the market on one of the portals (e.g. Rightmove, Zoopla or On The Market) before asking to view it. But would it surprise you that depending on the location and type, up to one in five houses don’t actually make it on to the portals for sale.
This means if the homebuyer hadn’t registered themselves on the agents mailing list, they would’ve missed out on their ‘forever home’, because they would not have known the property was for sale until it was too late.
Quite simply, if you are serious about moving home in Northampton, get yourself on the mailing lists of all the agents in Northampton.
Wages Rising by 8.3% pa - How Will This Affect the Northampton Property Market?
As they struggle to meet demand, Argos have had to increase the wages of their HGV drivers from £11.41 an hour to £15 an hour - a rise of 31.2% meaning their pay goes from £27k to £35k. Care home providers are offering signing-on bonuses of many thousands of pounds to entice nursing staff away from their competitors, and new homes contractors say labour costs are growing as the housing boom pushes up demand for bricklayers and joiners. Restaurant chains, coffee shops, blue-collar workers in factories and warehouses are seeing wages rise at an extraordinary rate.
The average wage for a worker in Northampton in full-time employment is £606.30 per week (before tax).
We can all argue over the reasons behind it; some suggest the ‘B’ word (ending in ..xit), whilst others put it down to the pandemic and some the demographic changes of UK population.
So, before I look at what it could do to the Northampton property market, let me look at why wages are rising. You will note all the above inflation wage increases are in blue-collar industries.
(Blue-collar workers refers to any worker who engages in physical or manual labour, such as building, hospitality, maintenance etc., whilst white-collar workers are those classed in the professions and service industries).
What are the reasons for these wage increases?
How could these wage increases affect the Northampton property market?
White-collar wages, since the turn of the millennium, have risen in real terms, yet blue-collar wages have remained stagnant (although they started to pick up slowly just before the pandemic).
So, if all blue-collar workers are now seeing a substantial increase in their real wages since the pandemic, what will this mean especially for the Northampton property market? It would mean the following…
Starting with unemployment:
3,240 West Northamptonshire people have come off the dole queue in the last 12 months alone, reducing the unemployment rate by 1.7% to the current 5.3% in our local authority area.
If wages continue to grow for everyone, that means unemployment will continue to reduce.
Secondly, these pay rises will start to burn holes in people pockets. We should assume those people with the extra cash will spend it. In fact, it is a recognised trait in economics that blue-collar workers tend to spend a lot more of any increase in disposable income (when compared to white-collar workers). This would give a boost to the retail, hospitality, leisure and travel industries very quickly.
Northampton rents are already 10.4% higher than 12 months ago,
and if wages continue to grow, then rents will increase even further. This is because rents in the private sector tend to rise in line with wages rather than with property prices.
This is excellent news for Northampton buy-to-let landlords.
Next, if wages for blue-collar workers continue to grow, I believe we will finally see a long-term growth in home ownership again. In 2008, 68% of people owned their own home, yet that had been slowly reducing over the 2010s to 63% in 2018. Yet since 2018, this has increased slightly to 65%.
The Brits who had the biggest problem jumping on to the property ladder were not just the 20 something’s, but also middle-aged blue-collar workers. With blue-collar wages stagnant over the last two decades, and accelerating house prices, it was much tougher for them to save up a deposit for a mortgage.
Yet with the Governments recent 5% deposit mortgages and more disposable income (because of the wage rises), some might decide not to spend the extra on going out and holidays and buy their first home instead (because most people want to own the place where they live - if they can afford it, they will buy).
Overall, if this increase in blue-collar wages is across the board, then this could be one of the greatest things to happen to the Northampton property market in a long time.
It is certainly long overdue. Since the millennium, wages at the bottom end of the pay scale (i.e. blue-collar workers) have deteriorated, while the professional white-collar middle classes have done much better. The disparities between both classes/workers are both imbalanced and harmful to the economy and society as a whole.
But what is the real story behind the headlines?
One school of thought is that some fear these wage increases will fuel hyperinflation (and in turn, interest rates will have to rise to counter that).
As I have mentioned many times in my articles on the Northampton property market, the last thing we need is a rise in interest rates (as mortgage rates will increase accordingly). A rise in interest rates will put a massive brake on the Northampton property market – which is not good for anyone.
Also, we have to remember a few things…
there are still 1.9m people on furlough (which stops at the end of September).
Not all of those people will go back to their original jobs, meaning they will need to find a new job, so the pay pressures could just as easily diminish as employment bottlenecks clear.
Also, the 8.3% wage rise is based on a year-on-year figure (i.e. a snapshot of now versus a year ago) and therefore the headline figures have been profoundly distorted by the large numbers of blue-collar workers on furlough in 2020 (i.e. they were on 80% pay). The Office for National Statistics have gone on record saying that, accounting for some of the distortions caused by the pandemic, real wages for blue-collar workers are more likely 3.5% up.
Finally, as with all things, the devil is in the detail. The newspaper headlines reporting the over inflated pay rises this spring are true. However, in truth (of course we all know bad news sells newspapers) these wage rises were focused on professions with specialist skills. For example, whilst wages for HGV lorry drivers have risen by double digits, pay rates for courier drivers have remained stagnant. At the same time, wage growth for white-collar jobs is almost at zero for yet another year.
To conclude, there are interesting times ahead for everyone involved in the Northampton property market. I do not profess to know all the answers, however, I do have my own opinions. Whether you are a Northampton first-time buyer, second-time buyer, homeowner, landlord or tenant and would like to pick my brains on any aspect to do with the Northampton property market, please do not hesitate to drop me a DM, give me a call or send me an email.
Northampton Buy-to-Let Market on the Rise as Returns Rise by 37.5% in 5 Years
Northampton landlords are becoming progressively more self-assured about expanding their rental portfolios; as Northampton rents rise, mortgage interest rates fall and demand for decent Northampton rental properties outstrips supply.
A number of reports nationally would suggest around a third of UK ‘portfolio’ landlords (i.e. landlords with more than one rental property) are actively looking to expand their rental portfolios in the next 12 to 18 months, that would locally mean…
2,117 Northampton ‘portfolio’ landlords are looking to add to their rental portfolio by the end of 2022.
The pandemic has had a substantial change to what we want from a home. Many people think that relates just to homeowners, yet nothing could be further from the truth as it also applies to tenants.
Homeowner or tenant, many of us have spent a lot of time away from places of work. Many office workers face the outlook of the combination of working from home as well as at the office, meaning a change in what people look for in their home. People (including tenants) are looking for larger properties, with extra rooms for office space and decent sized gardens or to be closer to outside green space.
So, let’s look at the ‘scores on the doors’ as to why Northampton landlords are on the up…
Northampton house prices are 22.9% higher than 5 years ago.
Because some Northampton first-time buyers are being priced out of the market due to these house price rises, they are being forced back into the rental market. Add the extra demand of the 1 in 10 Northampton house sellers, who in the last 12 months have had to go into rented accommodation instead of buying, and this has created increased demand. Meaning…
Rents today in Northampton are 10.4% higher than a year ago and 14.6% higher than 5 years ago.
The average rent of a Northampton property today is £998 pcm.
In previous articles on the Northampton property market, I was talking about the lack of properties to buy – yet that issue is also there in the British rental property market. Now let’s look at the supply of rental properties.
Would it surprise you that the number of private rented homes in the UK has fallen in the last 12 months by just over 2.5%?
Why? One reason has been many ‘accidental’ landlords have used this housing market to sell their property for a good price. That means the supply of available rental properties has decreased. The perfect storm of increased demand and lower supply, and with many Northampton tenants competing for those larger Northampton homes, they may find Northampton rental prices pick up even more over the next year.
What about buy-to-let mortgages for Northampton landlords?
The banks all but withdrew from buy-to-let lending in the first lockdown. Yet, since last summer, things have settled down and during 2021 there has been a mortgage price war.
Northampton landlords can borrow 60% of the value of their BTL property on a two-year fixed rate of 1.18% from Platform and even those with a 20% deposit (that’s borrowing 80%) can borrow that money at 2.49% 2-year fixed rate from The Mortgage Works. Those looking to fix for a little longer can get 1.44% from The Mortgage Works and 1.79% at 75% loan to value from Santander.
(It must be noted there are some fees to these mortgages, and you must take advice from a qualified mortgage advisor before deciding which mortgage is best for you).
So, is now the best time to invest in Northampton buy-to-let property?
If you are attracted to invest in Northampton buy-to-let, it’s vital to do your homework first – particularly if you are new to the game.
When estimating the expected rental returns on investment, capital growth and yields, many Northampton landlords look to what has happened with house prices and rental prices, yet past performance does not always deliver a future guaranteed return.
Smart Northampton landlords will speak with agents like myself and others in Northampton, prudently researching the Northampton property market to discover what types of properties are in high demand (and short supply) from tenants.
Whether you are a landlord of ours or not, please feel free to drop me a line via email or social media for no nonsense advice on the important matters to look out for before investing in Northampton buy-to-let
Why Are More Northampton OAP Homeowners Deciding Not to Move Home?
A recent report by Legal & General stated that, since the pandemic, many older homeowners had put their plans to move home 'on ice'. It said that fewer OAP homeowners are planning to downsize from their large family homes after the pandemic made them realise the actual value of their local community and space.
Historically, many OAPs move home to another part of the country to live near their grown-up children. Yet the pandemic has shown that OAPs can live quite well locally without moving to a strange new town to live near their children. The support networks of their friends in their existing community has emphasised the significance and importance of having friends close by.
Yet this trend isn't just for OAPs moving away. Many Northampton OAPs who aren't moving away from Northampton (because their family is still local) are also deciding to stay put longer for the same reasons. Even though they are rattling around their large 3 and 4 bed detached family homes, they love the space their large Northampton homes offer.
And for those Northampton OAPs who are wanting to move, the issue is that the choice of properties they could buy to downsize is limited. This scarcity of properties for sale, called the 'housing crunch’, can be seen by that lack of choice of properties for OAPs to move to.
Only 70 bungalows are for sale within a 1-mile radius of Northampton
In a ‘normal' Northampton property market, I would expect this to be double or even triple this number.
All these factors combined means these OAP "eternal homeowners" threaten to make the scarcity of properties coming on to the market even worse!
So, why is this an issue for everyone else?
Well, because Northampton OAPs aren’t moving from their large 3 and 4 bed detached homes to smaller bungalows or ground floor apartments, this is creating a blockage on the housing ladder. Northampton families, in their 30’s and 40’s, are desperate for larger 3 and 4 bed detached homes for their ever-expanding families. But if the OAP sellers of those family houses aren’t moving, they will remain overcrowded in their existing homes.
Let’s look at the numbers first.
Many Northampton OAP homeowners simply love the house and neighbourhood they live in, often living in their homes for over 25+ years. I talk to many mature Northampton homeowners who say they are afraid to put their home on the market, because they believe (incorrectly) if they find a buyer for their home and can’t find another property to go to … they would be made homeless.
I can only share my opinions on the matter. The one thing I have seen in my years in the property market is that so many Northampton people leave it too late to move home. So, when they do move, they aren’t fit enough to do all the jobs in their new home. Indeed, is it better to move home in your late 60's/early 70's, meaning you can still do the little things to make your new house a home, rather than in your late 70's/early 80’s and find the jobs are much harder to do?
Also, if you are worried about finding your next home, get yourself on the mailing lists of all the Northampton estate agents. A recent study showed only 1 in 6 buyers were on an agent’s mailing list for the property they bought. Therefore, by being on the mailing list, you will get to know of any suitable properties coming on the market before most others. This is important in this housing market; a property is often sold STC before it hits Rightmove (to a buyer that put themselves on the agent’s mailing list).
By downsizing, you could use the additional funds to top up your pension, take the family on a holiday of a lifetime (once it’s safe to do so of course), or help your children get on the housing ladder themselves with a deposit for their own home.
I fully appreciate many of the 14,112 OAP homeowners in Northampton have many reasons to stay, be that sentimental, friendship, support networks etc. My advice to all of you is to do your homework, put yourselves on the mailing lists of agents (in case the property of your dreams comes up) and do what is best for you. By downsizing, you are giving yourself better options for your quality of life and massive opportunities to spend more time on the things you enjoy like your family, holidays, or even helping others.
The choice, as they say, is yours.
If you are a Northampton homeowner and want to ask me anything about what I have said, please drop me a line to discuss the matter further at no cost or obligation.
Northampton Homeowners Have Turned to the Rental Market to Cash in by £19,300 Each
Should you sell or should you buy in this most interesting Northampton property market?
I have calculated that at least 295 Northampton house sellers have rented a home to break their house chain in the last 12 months, although at a cost as they face paying many thousands of pounds in rent.
There are a number of reasons behind this. One is because they cannot find another Northampton property to buy amidst a continuing shortage of new Northampton properties coming to the market. Although, there are others who have achieved such a high price for their home they have decided to cash in and are (hopefully for them) waiting for the Northampton property market drop?
Or will it drop? (More on that later).
Those selling their home have seen the …
average Northampton home rise in value in the last 12 months by £19,300.
Yet, if they have had to go into private renting, they have paid for that privilege in the rent they have had to pay.
The average cost of a six-month rental agreement in Northampton is £5,461, meaning accidental Northampton tenants have pumped £1,610,880 into the Northampton rental market in the last 12 months.
The unevenness between the number of properties for sale and demand for them is at its widest since the early 2000’s. Whilst we have seen a slight improvement in the number of properties for sale in Northampton, there are still …
39% fewer homes up for sale today in Northampton, compared to August last year.
This serious shortage of Northampton property for sale is discouraging some hesitant Northampton homeowners from putting their property on to the housing market, anxious they will not be able to find their next home and will be left renting.
Yet some savvy Northampton homeowners are moving into a rented property as a way to navigate the shortage of properties to buy. If you have someone offering you top dollar for your Northampton home, whilst you will have the hassle of two moves, the increase in value of your Northampton home will more than offset the rent.
Also, when you come to buy your next Northampton home, you will be chain free and in pole position to buy your ‘forever home’, rather than being overlooked for the home because you are sold stc and burdened with a chain.
Yet this trend has made life tougher for long-term Northampton tenants.
On average there were normally 500 to 585 properties available to rent in Northampton on Rightmove at any one time (pre-pandemic), today there are only 251 available.
To give you an idea of how this has affected the Northampton rental market, with heightened demand and lower supply, demand for rental properties has grown to such an extent …
the average rent in Northampton has grown from £910 per month a year ago to £982 per month today.
Tenants are suffering from less choice and higher rents in the Northampton property rental market, with few indications it’s going to significantly ease on the run up to Christmas.
So, what is going to happen to the Northampton property market?
Well, those of you that follow me know I regularly write about the Northampton property market in my property blog. If you would like some recent articles I have written about the future of the local property, either drop me a line and I will send you some links to those posts, send me a DM or contact me by telephone.
In the meantime, please do share your thoughts on the matter in the comments.
How Many Days Does It Take to Sell a Northampton Home?
Whether you are a Northampton homeowner, first-time buyer or landlord; the last 15 months has been a roller coaster ride when it comes to the Northampton property market.
With 213,120 UK house buyers and 58,580 UK tenants moving home in June, the summer has been manic for many people. Meaning some Northampton homeowners are asking if they should be staying put? Or should they wait for the best home to come onto the market before putting their home up for sale or find a buyer but be unable to find a property – it’s all rather confusing.
Then we have some Northampton landlords who are asking themselves if they should buy another property investment (and some even wondering if they should sell and cash in on the boom) and then finally, with 95% mortgages back, first-time buyers are asking if they should look to take the plunge and buy their first home or wait.
In this article, I hope I can help you with the decisions you might want to make and to navigate this unusual post lockdown housing market. Let me start with some stats to show you what is happening at the moment in Northampton.
The average time it takes to sell a Northampton property in this housing market is 20 days.
Interesting when compared with nearby Moulton at 29 days, Towcester at 22 days, Wellingborough at 12 days and Daventry at 26 days.
Look back five years, it took 51 days on average to sell a Northampton home – the local property market is now certainly ‘cooking on gas’!
The property market has certainly solidified a little over the last few weeks. The Stamp Duty holiday rush has seen its run and the pent-up post-Brexit and more importantly post-lockdown demand has receded and although I am still observing competing offers on most Northampton properties, I certainly get a feeling of a small shift in the balance-of-power between the seller and buyer.
Many people have put their house hunting on hold as they go on their first holiday since 2019, be that glamping in Cornwall or having days out on a ‘staycation’. That means between now and mid-September, depending on what type of property you are looking for, many buyers could well discover that there are fewer competitors for their next home than there might be.
Also, July and August are notoriously barren months for estate agents putting new properties up for sale. Yet since the typical ‘seasonal property market’ is so out of kilter as a result of the pandemic, many agents are taking on a decent number of very good properties now, which is not something that characteristically would have happened in the summer months.
The important thing is not to wait for the property to hit the portals (i.e. Rightmove etc). Yet research shows, nearly 5 out of 6 people who bought their home were not on the agents mailing list before they viewed the home they eventually bought. That’s OK in a normal property market as you can wait until it hits Rightmove or Zoopla, yet these are unprecedented times and if you are not on an agent’s mailing list - you will miss out on properties.
If you don’t put yourself on the agent’s mailing lists, you could end up losing out on the property of your dreams.
So, the question is should you put your Northampton home on the market first or wait for the right property to come along?
Roll the clock back a few years and it was standard practice for people to wait for their dream home to come onto the market, then put theirs on and hope that it would sell in time. This housing market is different and only those who are in a position to proceed (cash buyers or those sold subject to contract) will be considered as serious buyers.
Yet, nobody wants to be homeless if they do sell.
Estate agents are returning back to their old skills from the 1980s and 1990s by chain building. By starting at the bottom of the chain of the smaller house and building up a chain, waiting for everybody to find their next homes, nobody need be made homeless.
This is not an issue because most house sales are taking on average between 20 and 25 weeks and as long as everybody communicates with each other and everyone knows where they are, then normally things go through, albeit slower. Can you believe it – estate agents really are earning their money with this!
So what Northampton homes are selling the fastest?
Northampton Terraced and Town Houses are selling in 13 days
Northampton Semi-Detached Houses are selling in 17 days
Northampton Detached Houses are selling in 27 days
Northampton Apartments are selling in 49 days
Northampton landlords, maybe there are some bargains to be had with some apartments with that length of time on the market? Again, do your homework or even consider picking up the phone to me for a chat.
So, there you have it. The lessons I hope you have now learnt from this are to put yourself on agent’s mailing lists, talk to agents about your requirements so you get a heads up first when a property is coming onto the market (don’t just do everything over a computer screen) and once you have found a property be a little bit more patient with how long it takes to build a chain and then get the property through to an exchange and completion so you get the keys to your forever home.
Whether you are a Northampton homeowner, Northampton landlord or first-time buyer and would like some advice and opinion on your circumstances in the current Northampton property market, please don’t hesitate to either pick up the phone or drop me a message.
To everyone else, what are your thoughts on the Northampton property market?
Only 1 in 21 Northampton Properties are Bungalows, Despite an Ageing Population. Why?
The bungalow is a building that has represented a more leisurely, gentler way of life since the early 1900’s. Bungalows have been sold as an aspiration for those about to retire, saving them the annoyance of having to climb stairs. With an ageing population, one would think they would be building more bungalows, yet nothing could be further from the truth. In fact, this could be one of the main issues that is holding back many mature homeowners moving home thus creating a bottleneck in the Northampton property market for the younger families who are being held back and unable to move into the larger homes they so need to grow their families.
So, before I answer that question, let me share this fascinating fact about bungalows. The word ‘bungalow’ originated in India, not the UK. The name is derived from the Hindi word ‘baṅglā’ or the Gujarati word ‘baṅglo’, both of which seem to refer to a home occupied by a Bengali person. The colonial English started to use it for themselves in the late 1600s to describe the same sort of basic lodgings that sailors and staff of the invading East India Company used.
Anyway, back to the here and now in Northampton.
There are 4,339 bungalows in Northampton.
When you consider there are 89,984 properties in Northampton, that means only 4.82% of property in Northampton are bungalows.
To give you an idea of the age demographic of Northampton homeowners, there are 22,199 Northampton homeowners aged 65 years old (and over) and 28,392 Northampton homeowners aged between 50 and 64 years of age.
You can see demand for bungalows is only expected to grow. Yet new homes builders are having to deal with soaring land prices, meaning to get a profit from the site they are under pressure to build more vertically than horizontally as with bungalows (as bungalows take up so much more land).
The last available data is from 2018 and only 1.6% new builds in the UK were bungalows, interesting when it was just over 7% in the middle of the 1990s. As British people are living longer, those existing Northampton bungalow homeowners will be living in them longer, thus creating even more of a bottleneck in the Northampton property market.
So, what is the answer?
Well with building land in Northampton at a shortage, maybe new homes builders should be forced under planning rules to reserve ground floor apartments to be set aside for older people to encourage them to move out of larger houses. I would challenge the long-held point of view that building more bungalows in Northampton is the pre-eminent way to urge growing numbers of mature ‘last-time buyers’ to move out of their under-occupied Northampton homes and free up their large homes (where their children have flown the nest) for younger Northampton families to grow.
With the new Planning Regulations due to be in place in a couple of years, local authorities could require builders to set aside a share of homes for mature residents, as they are already obligated to subsidise local community facilities or low-cost social housing in return for obtaining their planning permission to build in the first place.
Another option would be to convert all those empty shops in our town and city centres up and down the country into residential use. There is no need for planning permission to change offices to residential property and the Government are considering the same for shops (although I have heard of some horror stories of those office to residential developments making rabbit hutches look spacious) – so again, it comes down to the planning laws and making them fit for purpose.
There are no doubt consequences of not designing our housing stock for the 21st Century and beyond for older people.
The population of Northampton is set to grow
by 40,168 to 251,578 by 2040.
As the UK population gets older in the coming decades, as life expectancy is set to grow from 81 years 2 months to 83 years 3 months by 2040, I fully appreciate the need for more Northampton homes to be built for families, yet one must ask if the planning authorities are focusing too much on new housing for the younger generation, when they in fact should be encouraging new homes builders to develop larger, ground floor two-bedroom homes and decent accessible transport links.
These are my thoughts, what are yours the good people of Northampton?
Northampton Home Moves Hit Record High in June
as 239.9% more people sell in June compared to the Northampton area 10-year average
June 2021 was the busiest month ever for UK estate agents, home removal companies and conveyancers since monthly records began, as HMRC logged 213,120 residential transactions in June, a jump of more than 216% nationally on the same month last year (when the housing market had just reopened after the initial lockdown).
The cause of this was all the homebuyers trying to complete their property purchases before the approaching Stamp Duty Holiday deadline finished at the end of June. This was important as house buyers had until 30th June to complete their sale to save up to £15,000 in Stamp Duty Tax.
Many property market commentators believed the property market would slump after the Stamp Duty Holiday finished. Yet, I haven’t observed many property sales falling through or renegotiations because the buyer had to pay the extra Stamp Duty, and talking to other property professionals around the UK, neither have they.
Let’s not forget that the Stamp Duty Holiday isn't totally over as it is a tapering off until 30th September. This means homes and apartments sold under £250,000 will still profit from the Stamp Duty Holiday.
So, what sort of property transaction numbers are we talking about here in Northampton?
An average of 222 properties a month in the Northampton area have sold in the last 12 months, compared to the 10-year rolling average of 369 properties sold per month.
The best month ever before this June was March 2016, when there was a rush by Northampton buy-to-let landlords to secure a property before the introduction of a 3% Stamp Duty surcharge for second homes. In March 2016, 1,008 Northampton properties changed hands.
My calculations show 1,254 Northampton households sold in June 2021, 239.9% more than the long-term average.
So, what has driven this? The Stamp Duty changes caused some Northampton people to bring their home moves forward from 2022/3 to take advantage of the tax savings. Yet the most significant thing, talking to many Northampton homebuyers and sellers, is the pandemic has changed the way people live. Working from home and needing additional office space has meant many Northampton families (and others from out of the area) are seeking larger properties with more extensive gardens and better access to the countryside. I really can't see this social trend changing for a long time. I believe this means Northampton property prices in the medium term will not be markedly different over the next couple of years yet…
don't be alarmed to see volatile short-term changes in the run-up to Christmas (both up and down) with Northampton house prices.
I have always been a believer in the medium-term (i.e. over a couple of years) house price trends instead of the monthly trends, which can sometimes be like a yo-yo. I have always said the best bellwether to the health of the Northampton property market is the number of property transactions rather than the house prices.
Finally, I can only see this continuing as Banks scrabble to give money away in the form of cheap mortgages. A few weeks HSBC and TSB launched a 0.94% two-year fixed rate deal for those wishing to borrow 60% or less. More recently, the Nationwide Building Society launched a 0.99% five-year fixed-rate mortgage deal (again on a maximum of 60% loan to value basis).
If you would like a chat about the Northampton property market, your options and where you stand in the Northampton property market – please do not hesitate to give me a call.
In the meantime, I would love your thoughts on this.
Has the pandemic made you move home earlier?
What do you think will happen in the coming years to property in Northampton? Share your views.
Why Savvy Northampton Buy-to-Let Landlords Don’t Use 10-Year Mortgages
And the reason you shouldn’t either
I know of many Northampton buy-to-let landlords who fell into property investing by accident. Many didn’t want to sell their family home when the Northampton housing market crashed in the Credit Crunch of 2009/10, yet still needed to move (often for work). They thought they would keep their Northampton family home in case they ever moved back to Northampton. Yet by keeping it, it couldn’t remain empty (there was still a mortgage to pay on it), so they ended up renting their home out.
And that was the start of many Northampton buy-to-let landlord's journeys!
Many of you Northampton landlords reading this have had your fair share of problems, from tenants doing a midnight flit, rent arrears and troublesome tenants, yet also had your rewards.
The average Northampton landlord in the last ten years has seen their investment rise by an average of £108,100 and has earned in rent (before costs) £103,488.
Many of you reading this have started to learn about investing and creating a property portfolio by buying additional Northampton homes to rent. The average Northampton buy-to-let landlord now owns 3.38 properties that generate an impressive passive monthly income with the bonus of growing their household net-worth through growth in the value of their buy-to-let portfolio.
With the average Northampton buy-to-let landlord in the 56-to-58-year age range, one thing I learned about savvy buy-to-let investing, the shrewd Northampton landlords tend to want longer-term mortgages.
Taking longer-term mortgages reduces the risk to the landlord.
It sounds counterintuitive, yet it comes down to leverage. Let me explain that whilst leverage is formidable in buy-to-let, it is also quite risky.
Before I explain why some readers might not know what leverage is and how it relates to mortgages and buy-to-let, two-thirds of landlords are debt-free, yet those landlords who have come into the property investment games in the last 10 or 20 years have had to use borrowed money (mortgages) to finance their deals. Therefore, by putting down a small amount of say 20% and borrowing the other 80%, if you calculated your return on an investment base only the money that you put into the deal, then that is what is called leverage (i.e. using borrowed money as a funding source when investing in property and generate greater returns on borrowed money).
You would think, as, say a typical 55-year-old Northampton landlord, you would want to be only taking a mortgage out for however long you intend to work (say ten years at most) – meaning your portfolio would be all bought and paid for by the time you retire. Yet the clever buy-to-let Northampton landlords I talk to don’t see their portfolio as having to be paid off (and mortgage-free) by the time they retire. They have understood how to utilise and administer their mortgage debt rationally to enhance their returns without taking on unwarranted risk.
By taking a short-term mortgage of say ten years, compared to a 25-year mortgage, during those ten years, your monthly mortgage payments will be particularly high (because the longer the mortgage term, the smaller the monthly payments will be).
Also, you can pay off a 25-year mortgage in 10 years, but you cannot pay off a 10-year mortgage in 25 years.
Longer mortgage terms mean lower monthly mortgage payments, which in turn means greater cash flow and more elasticity within your rental portfolio. Now to some Northampton landlords, possessing their rental properties debt-free is very important. Yet, I would still seriously consider taking the 25-year buy-to-let mortgage and make additional payments every month to help you to pay the mortgage off early …
Therefore, if for example, you have a bad couple of months without any rent coming in or unexpected bills, you can return to making the mandatory lower monthly mortgage payments without getting your property repossessed.
So, by taking on the longer-term mortgage, you decrease your risk because it has the lower required payments.
Let me give you an example - if our Northampton landlord wanted to buy a Northampton terraced house property for say £213,500 and put down a 25% deposit of £53,375, the best buy-to-let deal I found online on the day of writing this article was a 1.79% Santander 5-year fixed-rate buy-to-let mortgage.
Looking at the mortgage payments per month when comparing the mortgage terms; on the 10-year mortgage, the mortgage payment would be £1,471.22 per month. Therefore, our landlord would have to top up from personal savings to make up the monthly mortgage payments. Whilst if they choose the 25-year mortgage, the mortgage payment would be £676.36 per month. This would mean our landlord would be in profit from day one.
Some might say though the longer term means more interest payments, as it's 25 years and not 10 years. Yet, at today's low interest rates, that would only mean an additional £26,362 in interest payments spread over 15 years – not much in the grand scheme of things.
Therefore, by taking the longer-term mortgage, as a savvy Northampton landlord, you are 'cash flow positive’, meaning you can build a reserve fund for every one of your rental properties to enable you to deal with any unforeseen voids and repairs.
The best way to deal with a buy-to-let property is to see it as a small mini-business, and as with all businesses, you need to grow your income and reduce your expenses whilst in the background provide a decent rate of return for your investment.
The greater the amount of mortgage debt you carry, the greater your monthly mortgage payments, and the simple fact is, the shorter the mortgage term, the higher the monthly mortgage payments. So, if you take on a sensible level of mortgage debt and be ‘cash flow positive’, you can profit from much better returns without taking on excessive risk.
These are my thoughts -please share yours.
P.S. Before I go, I have to say this to cover my proverbial. My comments are only a very brief commentary on the issues raised and should not be relied on as financial advice and that no liability is accepted for such reliance, and that anyone needing such advice should consult a qualified financial adviser or other authorised person.
£527,641 – ‘Wood’ You Pay That for a Northampton Semi-Detached House?
The value of an average Northampton semi-detached house has increased in value by £11,922 in the last 12 months, an increase in value of 4.79%.
Yet the costs of building a Northampton home have shot up even more in the last 12 months, meaning the price of Northampton new homes and any building works you do to your Northampton home in the coming months and years could be a lot higher.
The British house building profession is experiencing a building materials supply problem. Everything from cement to bricks, timber and roof tiles, plastic guttering, copper wire and pipe to insulation, even kitchen sinks have become scarce – and when people can find them, they are costly.
For example, looking at the timber industry, three-quarters of the UK's building timber comes from abroad, so lockdowns around Europe put a restraint on the timber processing industries of Sweden, Lithuania and Latvia throughout 2020. In addition, building material supply chains were interrupted due to the lockdowns imposed by their governments, resulting in many sawmills in those countries restricting shift work to comply with their country’s social distancing rules. Some mills even stopped all work for eight weeks last year, meaning they were incapable of cutting, milling or treating timber, causing their existing stocks of building wood to run dry.
Yet, whilst we were all in lockdown, everyone started doing DIY projects, so the public demand for building timber in the UK remained high, giving little opportunity for UK sawmills (let alone North-eastern Europe) to catch up and restock to the levels previously held before the pandemic.
Building timber costs 112% more than a year ago, steel RSJ’s are a lot more expensive because iron ore has gone up 120.1% whilst aluminium is up 56.8%, and copper is up 59.7%.
All the blame cannot be laid at the feet of the virus and lockdown. The ‘B’ word caused issues with supply at the start of the year. Building materials are a worldwide supply chain issue; this Spring’s Suez boat crisis, when many boats were diverted around Africa (as the length of time the blockage was going to last was unknown) exacerbated the problem. All this has combined to make the cost of sending a 40ft container from China to Tilbury Docks £7,576 today, compared to £1,195 just before the crisis. Also, supplies of sand and cement are particularly low with massive demand from the large £98bn High Speed 2 (HS2) rail project. All this combined is affecting many building projects, big and small, across the UK.
If an average Northampton semi-detached house had risen by the price of building timber in the last 12 months, today it would be worth £527,641, not the current £260,809.
RSJ (steel joists) take twenty weeks to arrive, compared with the typical five weeks, whilst plasterboard is being rationed with weeks of delays for the ‘good stuff’ and MDF wood, usually takes seven days to arrive; now it takes over a month. Roof battens need to be ordered a month in advance, whilst pre-lockdown they were commonly held in stock by every building merchant.
Demand for building materials has increased so quickly because many British homeowners are driving the explosion. Those people in safe jobs with little opportunity to spend money on foreign holidays and fancy restaurants decided to invest in their property and gardens. According to the Bank of England, this craving for home improvement has particularly exploded since the mature generation started to be double jabbed (their savings accounts have increased by £180bn during the pandemic).
As I have explained in previous articles, these increases in the price of raw material will fuel inflation, possibly affecting interest rates upward. An increase in interest rates will make a material difference to the value of Northampton property. To what extent? Please read my previous articles on the Northampton property market.
Please do share your stories of issues with builders and building materials over the last 15 months in the comments. I appreciate any stories you can provide to help others in Northampton.
Is Northampton Heading Towards a House Price Crash?
Northampton house prices dropped by 0.3% last month, according to the Land Registry.
This means the annual rate of house price growth in Northampton has eased to 6.3%, a drop from the 7.7% yearly rate experienced only a couple of months ago. Don't get me wrong, this is still decent growth in local house prices in anyone's eyes, yet the 'pedal to the metal' growth rates seen only a few months ago do appear to be easing.
Looking at the national figures, many people were concerned the UK property market was overheating as spring saw annual growth of 9.9%, the highest rate of house price growth documented since June 2007 (when national house prices were rising by 10.8% pa). It was only a matter of a few months later the Credit Crunch hit, and the value of the average UK home plummeted from £190,032 to £154,452 in 18 months, a drop of 18.7%.
Government economic measures such as the Furlough Scheme and the Stamp Duty Holiday have so far shielded the Northampton property market from the worst economic recession since 1709.
So, the question is, can this growth in Northampton house prices continue, or is this the start of a house price crash?
One thing is for sure, looking at the number of For Sale boards going up and turning to sold just as quick, shows this market is not maintainable for the long term. Most of the Northampton people looking to move home have brought forward their home-moves from 2022/3 to this year because of the Stamp Duty Holiday and the lifestyle choice of wanting a bigger garden/office space at home.
Nonetheless, the doom-mongers in the press say there will be a second wave of house sellers that will flood the Northampton property market in the autumn and winter when furlough ends. They believe many of the 3.4m people still on furlough will be made redundant when furlough finishes at the end of September 2021 forcing them to move home.
This was the catalyst for the house price slump in 2008/9 mentioned above, when many Northampton homeowners dumped their homes onto the Northampton housing market.
After all, many Northampton homeowners lost their jobs and had mortgages paying 6% to 7% in interest payments.
However, the devil is always in the detail. The industry groups with the highest take-up rates of furlough are the hospitality (public houses) sector, where 70% of staff are furloughed. 65% of hotel staff are furloughed, and 44% people in the creative arts and entertainment industry are furloughed. Most employees in these sectors are in their 20's and early 30's and are tenants, not homeowners. This is going to be more of an issue for landlords than homeowners.
And of those furloughed homeowners who do unfortunately get made redundant later in the year, looking at the last four most recent house price crashes, buyers were wrestling with significant declines in mortgage affordability. For example, back in 1988, average mortgage rates were 13.9% before that crash and in 2007 (the Credit Crunch crash) 6.5%. Whilst today, they are under 2%, meaning the mortgages are a lot more affordable, and most Northampton homeowners who get made redundant will be able to ride out the storm better.
But surely, if Northampton house prices are rising, won’t Northampton homes become unaffordable?
Well, with low-interest rates, this means Northampton homes are still relatively affordable. In 1989, the house price to earnings ratio was 5.4 to 1 (i.e. the average house was 5.4 times the average UK salary), whilst today that stands at 8.8 to 1. It’s no wonder some people are concerned there will be a house price crash (as there was in 2008 when that ratio hit 7.5 to 1).
However, it doesn't matter what the house price to earnings ratio is .... it is what percentage of your income is required to pay your mortgage.
In 1989, 74.6% of your income was required to service an 80% loan to value mortgage on an average UK home (i.e. you borrowed 80% of the value of your house on a mortgage). In the 1990s that percentage dropped yet rose steadily over the next decade and a half, so by the time we got to 2008, that was an equally eye-watering figure of 61.6% of your income to service an 80% mortgage.
Today, it's only 35.9% of your income to service an 80% mortgage because of low interest rates.
So, if the issue is not the affordability of houses, what is the problem for Northampton homeowners?
Bank of England interest rates will affect what people pay on their mortgage (higher interest rates normally mean higher mortgage payments). Interest rates are used to reduce inflation, so if inflation rises, interest rates also rise to bring inflation back under control.
UK inflation has just gone through the 2% barrier, and I believe by the end of this year or early next, it will touch 4% or 5%. In normal circumstances, this would trigger the Government (or now the Bank of England) to raise interest rates. Yet, we had a similar scenario in the late 1980s/early 1990s with a spike in inflation to 8.5% due to a shortage of raw materials and labour, but this was soon sorted out, and inflation dropped quite quickly thereafter.
In the coming year, a shortage of raw materials might be an issue. If there is a shortage of raw materials (supply problems are being found in key items such as timber, concrete, aggregates and steel), this will fuel construction and manufacturing costs upwards.
Next, will there be a shortage of labour? Some say it won’t be an issue (as unemployment will be higher), yet there are certain sectors of the economy that have an imbalance of trained staff of specialised jobs or people not wanting work in that type of job in the first place.
For example, many hospitality and dining establishments are reporting a shortage of staff because they were often filled with hard-working European migrants. I have read reports of London restaurants advertising for chefs and waiting staff, who would have received 1000+ enquiries for such jobs pre-pandemic to only be receiving applications that could be counted on two hands this summer. The hospitality and dining sector was hit harder than most, having to stop trading during the three lockdowns and working under firm restrictions. This led to the majority of staff being placed on furlough (as mentioned above, 7 in 10 are still on furlough), which has prompted some to ride out the pandemic in their own Country.
The question is – will they return? If not, to entice them back restaurants will have to increase the wages they pay to attract the staff, which in turn will mean they will have to put their prices up (i.e. inflation). If businesses have to put their wages up and the cost of raw materials continues to rise, prices for everything will rise, and at this point, higher interest rates will kick in.
But how will increased interest rates affect the Northampton property market?
Thankfully, 91% of all new mortgages being written are fixed interest rate mortgages and 78% of all existing UK mortgages are fixed-rate (compared to 32.8% in the credit crunch) ... meaning we won’t have so many houses being dumped on the housing market like we did in the Credit Crunch, because on a fixed rate mortgage, if interest rates rise - mortgages don’t follow suit.
And that’s the key … unemployment combined with high-interest rates caused many Northampton homeowners to put their property onto the market in 2008/9. Tied in with curtailed demand for property, because it was really difficult to get a mortgage (that’s why it was called the credit crunch) ... we had an oversupply and subdued demand of Northampton homes - causing house prices to drop by 16% to 19% depending on what type of property you owned.
So, a good bellwether and indicator on what will (or will not) happen to Northampton property prices is the number of properties for sale at any one time.
There are only 902 properties available to buy in Northampton today, low when compared to the 14-year average of 1,904 properties for sale in the town, whilst at the height of the Credit Crunch, there were 3,721 properties for sale at one point in Northampton.
As we look to the future, if you want a crystal ball of what will happen to the Northampton property market ... you won’t go that far wrong by getting yourself on the property portals and seeing how many properties are for sale.
These are my thoughts ... what are yours?
How Eco-friendly are Northampton Homes?
‘It’s Not Easy Being Green’, was the song that Kermit sang on Sesame Street.
Yet now being green is a normal way of life for most of us. Walking or cycling places instead of taking the car, recycling and even shunning meat are some of the things most Northampton households are trying to do their ‘bit’ for going green.
Our conduct may have improved but when it comes to our Northampton homes, there is still a long way to go. It is estimated around a fifth of carbon emissions come from home energy usage (nearly three quarters from heating and lighting). The country is releasing 37% less carbon into the atmosphere than in 1990, yet we have legally binding targets to hit 100% by 2050 — and the Committee on Climate Change has stated the UK will need to eradicate greenhouse gas emissions from homes to meet that target.
Landlords were hit first because since April 2018, the Minimum Energy Efficiency Standards (MEES) regulations with regards to eco-friendliness of the rental properties have required all rental properties to have a minimum Energy Performance Certificate (EPC) rating of ‘E’ or above otherwise it is illegal to let out a property, bar a couple of exceptions. This has meant Northampton landlords have had to spend many thousands of pounds to improve their rental property’s EPC rating (an EPC rating of ‘A’ being the best eco rating through to a ‘G’ for the worst – just like washing machine or fridge ratings).
But new Government plans could hit Northampton homeowners in the pocket as well.
The Government is planning to force banks and building societies to penalise people wanting a mortgage of draughty low-eco homes with an energy performance certificate (EPC) rating of D or lower. For those properties not hitting the correct level of EPC rating, it is suggested some form of levy will be placed on the mortgage provider, who in turn will pass that on to the home buyers in the form of higher mortgage payments. Some are describing this charge as an ‘eco-mortgage levy’.
Just under 6 in 10 (56.9%) homes in Northampton would be hit by this ‘eco-mortgage levy’, thus potentially reducing the value of those homes
Interesting when you compare this with the national average of 60.6%.
In real numbers, 45,429 homeowners and landlords in our local authority area would either struggle to get a mortgage from a bank or building society or it would cost them more because they were a ‘D’ rating on their EPC or below.
Looking at the stats broken down for Northampton.
So, what can Northampton homeowners and landlords do to improve their EPC rating?
Well surprisingly, it need not cost a lot to improve the EPC rating of your Northampton home. One of the most inexpensive ways to help improve your Northampton home’s energy efficiency is low energy light bulbs with an estimated cost of just under £40 per UK property. Other efficiencies can be gained by insulating your hot water cylinder, draught proofing any single glazed windows, increasing your loft insulation and upgrading your central heating controls, all of which can be done for a total of around £750 to £850 per property.
If you want to know the EPC rating of your home, either google the phrase ‘EPC register’ or send me a message and I will find out for you.
Finally, as Kermit famously also said, “Life's like a movie. Write your own ending”. If you are a Northampton homeowner or Northampton landlord, why not look at your property’s EPC rating and look at the recommendations. You are going to have to spend the money sometime, so why not do it now and enjoy lower energy bills and when you come to sell, you won’t be penalised ... a win-win situation for you and the planet?
Your Great-Great Northampton Grandfather Would Only Have Paid £287 10s 0d for his Northampton Home in 1871
Would it surprise you even more when I said the ratio of house prices to wages are still lower today when compared to 1871? Yes, you read that correctly, as a proportion of average wages British house prices are 17.6% proportionally cheaper today than they were in 1871.
I wish to talk about the last 150 years of the British property market and later in the article, the Northampton property market. I will also touch on why before the 1900s, buying a home in Northampton was considerably more expensive than today and why that changed.
So, let’s look at some interesting stats to get us started:
I stated in the first part of the article it was more expensive to buy in the latter parts of the 19th Century than today. It may only be of historical interest, but back in 1871, the ratio of average house prices to average wages was 10.5 to 1 (i.e. the average house was worth ten and half times the average person’s wage), whilst today it stands at 8.8 to 1.
Interestingly, for the next 45 years, that ratio went on a downward trend relative to wages and only stopped falling after WW1, where the average house was worth only 2.2 times the average wage. This made houses more affordable and set the foundations for the homeowning passion we Brits have today.
So why did this happen, what can we learn from it and what does it mean for Northampton homeowners and Northampton landlords?
There are three significant drivers that made property a lot more affordable between 1871 and 1911: the Victorians built more property, made them smaller and people's wages rose significantly.
So, by 1911, the average Northampton property had
dropped in value from £287 in 1871 to £213.
N.B. – you might have noticed I wrote £287 in a slightly different way in the title of the article. Up to 1971, a pound was split not into 100 pence but 240 pence. There were 12 pence in a shilling and 20 shillings (or 240 pence) in a pound. It was expressed in the form £sd and spoken as "pounds, shillings and pence". I dropped that into the title as it’s the 50th anniversary this year of when the UK decimalised its currency (younger readers – do google the story – it’s a fascinating topic).
So back to the property market, and at the end of WW1, four in five people still rented, virtually all from private landlords. Politicians were concerned about the poor living standards of people’s homes, and this led to the ‘homes fit for heroes’ 1919 Housing Act which delivered subsidies for local councils to build council houses. The average value of a Northampton property in 1922 was £336.
The 1930s - By 1930, the average value of a Northampton property stood at £424. With the country building a third of a million houses per annum, interest rates fixed at 2% and hardly any planning regulations, supply of property was outstripping demand, so the average Northampton home dropped ever so slightly in value to £392 by 1938.
The 1940s - With the bombing of many towns and cities and housebuilding being stopped because of the war, this created a perfect storm to increase house prices after the war. By 1947, the average Northampton home had risen in value to £1,311 because just as food was rationed during and after the war, so were building materials. Builders could spend no more than £350 on building materials for a new home (and that lasted until 1954).
The 1950s - The '50s were all about building council houses – a quarter of a million of them each year. By 1959, the average Northampton home had risen steadily to £1,818.
The 1960s - This decade saw even more houses being built in the UK, with an average of a third of a million houses a year being built. Northampton is full of 1960’s council houses and now even more owner-occupied housing, meaning by the end of the decade Britain had as many homeowners as renters. The average Northampton house had risen in value to £3,335 by 1969.
The 1970s - We experienced the first boom and bust housing bubble in the early 1970s with house prices rising by over 30% a year in the early years of the decade (so the current 10% a year is child's play!) but prices dropped in 1974. They recovered quickly in the following years, not because of increased demand but due to hyperinflation, making the average Northampton house price rise to £16,959 by 1980.
The 1980s - This was the decade of council tenants being able to buy their own homes, although not many people know it was an idea from Labour. They decided against the idea, but it was seized upon by the Tories, who made it the cornerstone of their 1979 election manifesto. The property market helped improve the economy, and by 1988, Northampton property values increased to £35,473 (only to drop by 32% a couple of years later).
The 1990s - The housing market crash of the early 1990s was painful for all, exacerbated by mortgage interest rates being raised to 15% on Black Wednesday (16 September 1992) and left there for 12 months. Unemployment went from 1.5m to 3m for the second time in ten years, and many of those homeowners who had taken out large mortgages in the late 1980’s housing boom could no longer afford the repayments because of the high interest rates, meaning repossessions went through the roof. The crash also made builders nervous, and they only built 150,000 houses on average a year in this decade. Yet, by the mid-1990s, things started to improve. So much so, the average Northampton home was worth £66,498 by the turn of the millennium.
The 2000s - The decade of cheap mortgages and the rise of Buy-to-Let, together with a severe drop in the number of new homes being built, contributed to the UK’s third big housing bubble since WW2. The average Northampton house price more than doubled to £178,078 by 2008, before the Credit Crunch brought the boom to an end, and a year later (2009), the average Northampton property had dropped to £158,169.
The 2010s - The property market started to come back to life in the early 2010s with property values steadily rising throughout the decade, yet builders were only building around 135,000 new homes a year. It also might surprise you that by 2015/6, the number of homeowners was starting to rise quite significantly, meaning today, as we enter the 2020's decade, the average value of a Northampton property now stands at £262,851.
So, now we are back to 2021.
Yes, your Great-Great-Grandfather might have been able to buy their Northampton house for a shade over £287 in 1871. Taking inflation into account since 1871, that same Northampton house today would be £34,630.87, yet if his wages had increased by inflation at the same rate, the average wage today would be £81.91 per week, not the current £585.50 per week.
I appreciate there are plenty of other factors involved with this topic, such as the cost of renting, raising a deposit, changing lifestyles and the biggest point, the cost of borrowing money on a mortgage.
All this begs the question, what does the future hold for the Northampton property market?
It's obvious since the mid-1980s, house prices have sustained a period of impressive growth (even withstanding a couple of property crashes). The Bank of England has gone on record to say that much of the rise in average house values, comparative to wages, between 1985 and now can be seen because of a sustained, dramatic, and consistently unexpected decline in real interest rates and additionally concludes that: ‘An unexpected and persistent increase in the medium-term real interest rates will generate a fall in real house prices.’
Cheap mortgages and a lack of building have created this situation. So as long as interest rates don’t go back to their long-term average of the 5% to 7% range or the Government decides to increase building new homes to half a million a year (from the current 240,000 per year) ... things will carry on as they are in the medium to long-term.
These are my thoughts. I would love to hear any stories of your family buying property in the late 19th Century or early 20th Century and what they paid for it, together with the affordability of Northampton property and the future of it.
28.7% of Northampton Landlords Could be Fined £5,000 each with New Energy Regs
… whilst possible new mortgage rules for Northampton homeowners would make it harder to sell their draughty old properties
As the UK has committed to a legally binding target to be carbon neutral by 2050, one of the biggest producers of greenhouse gasses are residential properties. To hit that target, every UK property will need to achieve a minimum grade of C on their Energy Performance Certificate (EPC) by 2035. The issue is two thirds of UK’s homes (around 19 million households) are rated D or below.
To help the country hit its targets, in 2018 and again in 2020, the EPC requirements altered for buy-to-let landlords, meaning they couldn’t rent their property unless it had a minimum energy rating of ‘E’ or above.
And now for homeowners, the Government are considering forcing banks and building societies to publish the average EPC rating for all the homes they lend money on and if the banks and building societies don’t hit the Government EPC targets, they will be fined (meaning those homeowners with low energy efficient properties will have to pay much more for their mortgages).
So, let’s look at these two issues, first regarding Northampton landlords and their EPC’s, so you know what your lawful responsibilities are and what else Northampton landlords can expect in the future.
Since October 2008, all UK rental properties have required an EPC, yet from April 2018, the Minimum Energy Efficiency Standards (MEES) regulations with regards to EPCs have also required all rental properties with new tenancies and renewals to have a minimum EPC rating of ‘E’ or above. However, since April 2020, the MEES regulations have applied to all existing tenancies as well, meaning if your Northampton rental property doesn’t have a valid EPC rating of ‘E’ (or above), it is illegal to let out.
345 rental properties in Northampton are currently let out with a ‘F’ or ‘G’ EPC rating, making them illegal to rent out and each landlord liable for a £5,000 fine – they just don’t know it
The EPC lasts for 10 years and gives an energy rating of between A - very energy efficient to G - very energy inefficient. If you find yourself, as a Northampton landlord, with a rental property that has an EPC rating of below ‘E’, what are your options?
To start with, you have a responsibility by law to carry out the changes suggested in your EPC report to improve the energy rating of your property. The law states that landlords should spend up to a maximum of £3,500 on the energy efficiency improvements set out in the EPC. Yet, if by spending £3,500, that improves your EPC rating but doesn’t mean you reach the ‘E’ rating, whilst you will still be expected to improve the rental property and spend the money, you will be able to apply for a high-cost exemption via the PRS Exemptions Register and still let the property (even though you will have an EPC rating of F or G).
It must be noted that some properties are exempt from the MEES legislation. If your property is listed or protected and the improvements would unacceptably alter it, it is exempt from EPC requirements.
Once your EPC has been registered, it is then valid for ten years. Because the EPC regulations came into force in 2008, there will be some rental properties that had their initial EPC and not had it renewed on its 10th birthday. Now as a Northampton landlord, you do not need to get a new EPC if your EPC reaches its 10th birthday, unless that is, you are starting a new tenancy with new tenants. The issue is…
of 15,817 rental properties in Northampton, 4,555 of them have an EPC that is 10 years or older which has not been renewed
If you are a Northampton landlord, your EPC is 10 years old (or older) and your tenant leaves, you will require a new EPC, because if you don’t, you will be fined £5,000. If all those buy-to-let landlords in our local authority area ignored that law, accumulatively they could be fined £22.7m.
Secondly, what about Northampton homeowners and the mortgage companies?
Under new legislation being considered, homeowners living in poorly insulated and draughty homes (meaning they would have a low EPC rating) could pay more for their mortgages and lose value from their Northampton homes under Government plans to prioritise mortgages on properties with high energy-efficiency ratings.
There are 13,329 properties in Northampton with a rating of ‘E’ or below
The Department of Business (DoB) wants to force mortgage providers to classify the energy ratings of their borrowers’ homes and put the average into a Government league table, which will be presented on the DoB’s website. Mortgage providers will then get time sensitive targets to improve their average EPC scores, punishable by fines, meaning this would increase the mortgage costs for those with low energy efficient homes.
Maybe it’s time you looked at your EPC certificate and find out how you can improve your rating? If you are a Northampton landlord or Northampton homeowner, and would like to chat about your legal position or would like a copy of your EPC emailing to you, don’t hesitate to drop me a line and I will be more than happy to discuss your personal circumstances further without obligation.
So, is it right Northampton landlords should have to fork out to improve the energy performance of their rental property, yet they aren’t the ones benefiting? Also, should Northampton homeowners have to have higher mortgage payments in the future because they have a low energy-efficient home?
Let me know your thoughts.
Will the Northampton Property Market Continue to Boom?
All the signs are that the Northampton housing market is sat on good foundations, yet one key hazard could still scupper the market.
‘UK Property Prices Rising at Record Levels’ is the headline of many newspapers. In the last few weeks, the Halifax reported they had grown by 6.5% in the last 12 months, whilst the Nationwide said 7.1% and not to be outdone, the Government’s own Land Registry said 8.6%. Nothing new there then you might think, don’t UK house prices always increase?
Actually, they don’t, as many Northampton homeowners will remember 2009, when they dropped by 19%. Also, some more mature Northampton homeowners will remember the early 1990’s where house prices dropped just over 40% over 4 years (after the 1989 property crash). So, the increase in UK house prices over the last 12 months has mystified all the forecasts made by most economists as…
house prices were forecast to drop during the pandemic because during the previous six UK recessions experienced since WW2, house prices have always fallen sharply in real terms.
Yet 2020 was different with house price growth increasing at its highest rate since 2014 as the substantial Government support programmes (including Bounce Back Loans, grants and furlough) has mollified the hit to household incomes. Add to that the pent-up demand from the Boris Bounce, all the people working from home wanting an extra room for an office and therefore needing to move, plus the stamp duty tax holiday, with the cherry on the cake of 0.1% Bank of England interest rates keeping borrowing affordable. This has meant…
Northampton property values are 8.4% higher than a year ago.
Yet the affordability of property is a big issue going forward. By the time of the height of the last property boom in 2008, the national ratio of average property values to earnings had risen from 5.1 in 2000 to 8.8 (i.e. the average house price was 8.8 times the size of the UK’s average person’s annual earnings). We then had the property crash in the proceeding years, and the ratio dropped to around late six’s/early sevens. However, over the last few years, the ratio has been steadily rising and now with the recent growth in demand for property (the five reasons mentioned in the previous paragraph), the ratio has now smashed past nine. Looking locally…
the ratio of average property values to earnings in Northampton as a comparison was 3.6 in 2000, rising to 6.0 in 2008, dropping to 5.1 the year later when the Credit Crunch hit, and now currently stands at 7.0
So, are we heading for another house price crash? Maybe, maybe not - because the House Price to Earnings ratio only tells us part of the story. Another indicator of the property market is mortgage affordability, which measures the proportion of mortgage payments to average incomes. For all mortgage holders, in 2015, this stood at 24.13% and today it is only just above the national long-term average of 25%, demonstrating that property is still affordable.
Yet, the life blood of the property market are first-time buyers. The long-term average percentage of income which goes on mortgage payments for first-time buyers is 33%. Just before the 1989 property market crash, this stood at 54%. Whilst just before the 2008 property crash, it reached 49%. Today, it stands at 31.7% (and the reason it’s so low even with record high property prices is low interest rates, because when mortgage interest rates are low, this permits people to afford larger mortgages, which enables them to bid up house prices).
So why aren’t more first-time buyers buying more homes? Well in fact they are buying more homes. At the turn of the Millennium, just over half of 25yo to 35yo were homeowners and by 2014, this had dropped to just a third, although since then it has increased to 41%. Now with the reintroduction of the Government backed 95% mortgages in April, this demand will continue further.
Once furlough ends, unemployment will doubtless rise in the following 12 months, yet the economy is more than likely to be in a boom phase, so by the spring/summer of 2021, the unemployment rate should start to fall.
So, does everything look great for the Northampton property market?
Before you get the Champagne out, there is a cloud on the horizon - the possibility of higher interest rates.
Undoubtedly, for the next few years, interest rates will not go up (and if they do – it will only be nominally). However, down the line it may be a different tale. Interest rates are used to control a number of economic factors, one being the currency and secondly inflation.
As many suggest, if we get an economic boom in the next 12 to 18 months, as we come out of lockdown, this will put upward pressure on the price of goods and services. Normally, when prices go up (inflation), to ensure that inflation doesn’t get out of control, interest rates are normally increased to dampen down the inflation.
So, will interest rates rise? Undoubtably they will. Northampton homeowners and buy-to-let landlords should seriously consider protecting themselves with fixed rate mortgages (yet 3 in 10 mortgagees are still on variable rate mortgages!). I believe we will see some inflation in the order of 3% to 5% in the coming 24 to 36 months, yet the interest rates won’t be enabled to bring it down. We had a similar case in the early 2010’s when we had a mis-match of demand and supply of goods, and inflation spiked to 5%, before returning back to its long term 2% average quite quickly thereafter.
The Chancellor will also encourage some inflation to reduce the ‘real’ cost of the Billions he has borrowed because of the pandemic, yet won’t want to see interest rates increase to take the cost of the borrowing upwards.
If you are considering moving home or buying/selling a buy-to-let property in Northampton in the next 12 to 18 months, and want a chat about your options, don’t hesitate to drop me a line.
Finally, these are interesting times ahead – I would love your thoughts on this matter. Please do share them in the comments.hen mortgage interest rates are low, this permits people to afford larger mortgages, which enables them to bid up house prices).
Will Northampton House Prices Fall in 2022?
As 1 in 4 Northampton homes are selling within a fortnight of coming to market.
One of the most astounding things that has happened in the last 12 months was something that did not happen. Even after the country saw the deepest recession since the Great Freeze of 1709 with GDP dropping 28% in one quarter, one would have expected a large fall in Northampton house prices would follow. Yet…
Northampton house prices are 8.4% higher than 12 months ago.
Even though buying and selling Northampton property was put on ice for the first time in the history of the Northampton property market last spring due to the Covid 19 outbreak, as the Northampton property market wobbled on the edge of deep recession, it stepped back in early summer and now it is rocketing upwards as…
24.2% of Northampton homes are selling within a fortnight of coming to market.
Some commentators have suggested the end of the Stamp Duty holiday together with the ending of the furlough scheme on the 30th September 2021 could be the catalyst for a drop in house prices. Even the Government’s own regulator of finances expects UK house prices to fall around a couple of percentage points in 2022 whilst some others have predicted around a 5% drop as unemployment levels increase post furlough.
However, other property market forecasters believe that property values in 2022 won’t drop against the background of robust British economic recovery in Q3 and Q4 of 2021.
What do I think will happen to the Northampton property market in the next 12 months?
On the positive side, what I do know is the Stamp Duty holiday enabled Northampton homebuyers to spend those tax savings on the price paid for their Northampton home and that certainly accounts for some of the uplift in house prices mentioned above.
Also, the historically low interest rates that have supported Northampton homebuyers’ affordability for the last 13 years since the Credit Crunch has continued. Secondly, with people spending many months working from home, this has seemed to have polarised people’s inclination to make lifestyle changes. Finally, the Government has recently introduced 5% deposit mortgages for first-time buyers. All these factors will fuel demand and hence may cause house prices to rise.
On a more cautious note, I do not believe these very sturdy Northampton house value rises of the past year will persist at these levels for the next 12 months. With buyers having to use many thousands of pounds on Stamp Duty, the price they pay for their Northampton home will be curtailed, meaning property values by definition will ease.
The simple fact is the British economy has yet to feel the full effect of its largest recession since 1709, and we must remain considerate about the long-term effects of the economy (and unemployment levels) on the property market.
These are interesting times for the Northampton property market. If the price you want to achieve for your Northampton home is the most important thing, now as opposed to 2022 might be a good time to consider placing your property on the market.
Don’t forget, you can still put your Northampton property on the market, find a buyer and then go and see what is available to buy. Many buyers will wait for you to find a property, yet if they can’t/won’t – you won’t be made homeless. English property law means you can still come away from the sale and you won’t be forced to sell. If you would like to know a bit more about that or any aspect of buying or selling property in Northampton, drop me a message or call me.
Panic Buying in the Northampton Property Market?
Would it surprise you that there are 55% fewer properties for sale today in Northampton than a decade ago? Property values are much higher than a decade ago and the property market at the moment in Northampton is on fire. In all my years as an agent, I have never seen it like it is at the moment. Many people are saying it’s reminiscent of 1988 when dual-MIRAS relief was abolished by Nigel Lawson, as people are paying top dollar for property because they are buying property like there is no tomorrow.
66.7% of properties on the market in Northampton are sold stc
In a ‘normal property market’, that figure would be between 30% to 40%. There is no rhyme or reason behind it because it’s not as if we are going to run out of property to sell (unlike the panic buying of loo rolls last year in the supermarkets). With such a buoyant Northampton property market, being adept to state what your Northampton property is worth is exceptionally problematic.
This is further exacerbated by the lower-than-average properties on the market at the moment. To give you an idea of the issue …
there are 1,080 properties for sale in Northampton today,
compared to 2,412 a decade ago.
When there aren’t many properties on the market, to gain your instruction some estate agents will value your Northampton property by giving you an over inflated suggestion for the asking price. Why do they do that when the considered wisdom is estate agents only get paid once they sell it?
Well would it surprise you that many (not all) estate agents pay their employees a bonus to put your property on to the market and then pay a further bonus when they get you to reduce the asking price? Some estate agents know the fastest way to get your property to market is to be optimistic on the asking price to secure your property for sale, then work on you to reduce your asking price after it has been sitting on the market for a few months.
Nothing wrong with that you might say, I want to get the most for my Northampton home (and it is indeed the job of the estate agent to get the best price for their client). If I believe it is worth testing the market at a slightly higher asking price, I will suggest that, yet will always explain my thinking and if we have over cooked the asking price, we can swiftly realign it after a couple of weeks.
Yet because many estate agents are disposed to suggest over inflated asking prices to the house seller just to secure their business (i.e. overvaluing) but not manage the property for months and months ... this in turn causes Northampton properties to sit on the market and not sell.
In the best property market for 20 years, 15% of properties for sale in Northampton have been on the market for 6 months or more. Overvaluing is widespread among Northampton estate agents.
Most Northampton homeowners will ask three or four estate agents to value their Northampton home and take the middle figure when they want to sell. Yet, if all (or most) of your Northampton estate agents are over optimistic and they all give you a ‘gilded lily’ price to secure your instruction to sell your home (i.e. overvalue), then that middle figure will be too much. Most Northampton estate agents know they don’t win the business (i.e. secure the listing) if they tell the homeowner what they don’t want to hear.
So, what is the risk of overvaluing?
There is a potential massive cost to putting your Northampton home on the market at too high an asking price. Your estate agent will tell you that your Northampton home is worth a certain figure and then lock you in to a 16-week sole agency agreement (sometimes longer) which you cannot get out of early. If you are getting around two or three viewings a week, and the pictures and marketing material are half decent, then your pricing is about right, meaning in this market you should be sold (subject to contract) within a month to six weeks.
Yet, if your Northampton home has an over optimistic asking price (i.e. it is overpriced), you might only have a handful of viewings in a month and no offers. As the weeks and months go by, your overpriced Northampton home makes similar homes to yours (i.e. your competition) look really good value for money. That’s when you will get the price reduction call from the agent.
How many times have you seen a property that has been on the market a while and you have wondered what’s wrong with that? Also, to add insult to injury, the portals tell you how long a property has been on the market, adding weight to that argument.
The longer your property stays on the market, the desirability
of your Northampton home drops.
You will end up selling your Northampton home but only after a handful of price reductions, yet at what cost? Firstly, in those lost months, you would have missed out on many properties that you fell in love with, yet couldn’t buy because your home was languishing on the market with no interest (this is backed up by consumer champion Which, who said that if you have to reduce your asking price by 5% or more, it adds an extra 64 days to the sales process).
Secondly, you will end up selling your Northampton property for less than if you had placed the property on the market at a realistic asking price from day one (again backed up by Which). This is because buyers think there is something wrong with it, so as the homeowner gets fed up, they accept a lower offer to get their property sold.
Finally, because you take less for your property, your choice of the next property to buy will also be curtailed, meaning your dream home move might be more of a nightmare?
The best advice I can give you is to search the portals, make sure you look at properties that are also sold stc (which can normally be found by clicking on the filter section of the search on the portal). Then ask a couple of straight-talking trusted friends to do the same and compare your property to the competition that is both on the market and sold (stc).
Compare their locations, number and size of the rooms and size of plot and ask them where they see your property against those. Carry out the same exercise yourself (of course you will be slightly biased) and take a bellwether from all those figures. Then ask a number of Northampton agents to value your property and if you feel any are being overly optimistic challenge how they get to their figure and get them to qualify their belief in that figure – is their valuation realistically achievable in the market at the time? As we all know markets change and property prices go up and down and ultimately a property is only worth what a buyer will pay for it – this all requires careful consideration.
I can assure you most of the estate agents in Northampton are decent people, who want to do the best for you. All I ask is you do your homework and look at the sale of your Northampton property through the eyes of a cold-blooded buyer.
If you would like a chat about selling your Northampton home do give me a call.
Over 1 in 4 Northampton Properties Being Sold with No Chain
So is it a good idea to rent in between moving home, to be chain-free?
Moving home is said to be the third most stressful thing you can do, so if you can do anything to reduce that stress, so much the better? When buying your next Northampton home, being chain-free can certainly reduce your stress and offers many advantages over other buyers (and some disadvantages).
So, what is a chain? A property chain is made when there is a line of home buyers and home sellers linked through their property transactions e.g. a Northampton first-time buyer purchases a property, the sellers of that property then buy another property, and those sellers then buy another property, so on and so forth. Each home sale and purchase are reliant upon the success of every property in the so called ‘chain’. This means if there is one hiccup on one of the properties, every sale and purchase along the whole chain would collapse. No wonder everyone is on tenterhooks when there is a long chain involved.
Yet Northampton buyers who sell their home before searching for a new Northampton home considerably reduce their stress levels because they are not needing all the ducks to ‘line up in a row’ on the sale of their home in order to buy their new Northampton home.
Being chain-free puts Northampton home buyers in an enhanced position to negotiate with home sellers and they in turn may be more enthusiastic to accepting a lower offer.
Sounds brilliant this chain-free life doesn’t it? Everyone is a chain-free buyer once … when they are a first-time buyer and if they are lucky enough to have an additional home to move into. The other option is selling your Northampton home and moving into rented accommodation, but that will end up costing quite a few thousand pounds (in what many perceive as wasted money) together with the added cost of employing the services of home removers twice (with all the hassle that entails doubled!). However, that is what many Northampton homeowners are doing.
28.5% of all the properties on the market today in Northampton are being sold without a chain.
I can’t disagree, moving home twice in a short period will be stressful and rent could be perceived as ‘wasted money’, but I have to recommend you look at the bigger picture. It is one of the sturdiest sellers’ markets in a generation, meaning you should get top dollar for your Northampton home, knowing that many buyers are keen to complete before the stamp duty holiday ends in the autumn.
Then by waiting for the return of stamp duty and for the full roll out on the immunisation programme to give more Northampton homeowners the peace of mind to place their Northampton home on to the property market, for Northampton house prices to cool and the number of properties for sale to increase. Then you could pounce in and buy, with more Northampton homes to choose from and at more realistic asking prices.
So, does the type of Northampton property that is being sold make any difference?
Of course, these aren’t all Northampton homeowners going into rented accommodation hoping to bag a bargain next year. Many of the bungalows are being sold because their homeowner has either moved into sheltered accommodation or sadly passed on and there are Northampton landlords selling their Northampton buy-to-let rental investments.
And don’t get me wrong, there are also risks involved with this type of home buying strategy. Moving into rented accommodation means you are out of the Northampton property market. Property values could dip in the next 12 months, yet they still could continue to rise - you are taking a gamble on a dip in the market and it could go wrong.
Like most things in life, it depends on your own personal circumstances, where you are in your life, your attitude to risk and your belief on what will (or won’t) happen to property values in Northampton in the next 12 to 18 months.
If you would like a chat about your potential choices for your home move, then drop me a line.
Northampton Property Market: 2011-2021
A look back at the Northampton housing market over the last decade
With all of us completing the Census, a couple of weeks ago, it made me realise profoundly that mine and my family’s life, which from our own point of view seems unique and delightful, makes us all into a series of statistics for the Census gatherers to pore over. To digest and regurgitate facts, figures and trends for those who are interested in the ever-changing social circumstances of these islands.
However, the information from the Census is vital to improving our lives - Governments can plan the future with the information it provides and we in turn can wonder about the lives of our past generations with the information provided therein historically if we so wish.
Whilst the information from this Census won’t be published until March 2023, let us have a look at what has been happening in the Northampton property market since the last time we completed the Census in 2011.
Just to remind you, 2011 saw the wedding of Prince William and Kate Middleton, Mr Cameron was the PM, there was the last flight of the Space Shuttle and Game of Thrones premiered.
Whilst in the Northampton property market…
New properties built in Northampton…
Irrespective of any dip in Northampton house prices or transactions when the Stamp Duty Holiday ends in the autumn, this is a trend that looks set to continue, with no sign that supply of new homes is anywhere near to keeping pace with demand for households.
There have only been 5,444 new properties built in Northampton in the last 10 years, that’s around 45 a month. That means the population in Northampton has risen by 2.53 people for every new home built over that decade.
Nationally, the Country has only built just over 180k homes a year over the last decade, 120k less than the national target of 300k. In the meantime, the population has grown by more than 4 million.
When looking locally at the size of new build property in Northampton, the average property is just under 950 sq. ft., which is 21% smaller than a decade ago.
Rents in Northampton…
Whether you are a winner or loser in terms of rental values depends on whether you are a Northampton landlord or a Northampton tenant.
The average rent for a property in Northampton currently stands at £809 per month, whilst a decade ago, it was £669 per month
This means private rents have increased by £1.17 a month for the past ten years. Interesting, when compared to the national average of 98p a month whilst in London, rents have grown by £4.64 a month.
The next 10 years of the Northampton Property Market…
The next ten years will also be just as fascinating. To try and predict would be a fool’s game.
For example, who would have believed what the Northampton property market has done in the last 12 months since the start of Lockdown 1.0. The number of transactions (i.e. people moving) in turn with UK house prices having risen so much in the last year ... all during a worldwide pandemic and at a time of such mayhem and havoc in the UK and world economy, is nothing short of remarkable … the question is – is it sustainable?
Read these articles in the coming months and years and I will share with you what is happening to the value of your Northampton property, be you a Northampton homeowner or Northampton landlord.
Northampton Property Market Improved by 31.5% Over Pre-Pandemic Levels
The Northampton property market, for people looking to sell, is at its sturdiest for at least the last five years with home buyers jumping onto the Northampton property ladder with abandon.
Northampton house prices are anticipated to rise throughout 2021 after the Stamp Duty cut (and subsequent extension until the summer/autumn) and the newly revealed 95% mortgages for Northampton first-time buyers (and Northampton homeowners with minimal equity).
In addition, the continued low interest rates and the demand for larger homes because of lockdown, means the Northampton property market should remain bullish for a while. There is a surge in potential buyers putting themselves on mailing lists with Northampton estate agents, making the biggest disparity between supply and demand for Northampton property for many years.
Fears of a cliff edge for the Northampton housing market at the end of March have dispersed, somewhat due to the Stamp Duty tax deadline extensions, but also because the elevated level of buyer demand caused by the three lockdowns has continued to swell since the start of 2021 meaning that today …
69% of Northampton properties on the market are Sold (STC)
Interesting, when utilising data from theadvisory.co.uk website, the Northampton average for the last five years has only been 52%, meaning there has been an uplift of 31.5% in the proportion of Northampton properties sold (STC) compared to that five year average.
Yet what can’t be forgotten is that 9 out of 20 Northampton house sellers are also Northampton house buyers as well, so whilst they do indeed achieve a higher price for their Northampton property, they also have to pay more for the Northampton property they want to buy.
So, how much will Northampton house prices rise by?
Like all things in life, it’s all about demand and supply. I have discussed the demand, yet what about the supply of properties for sale?
There are 14% fewer Northampton properties for sale today compared to 6 years ago
Whilst February saw a lower than normal level of new properties coming onto to the Northampton property market, the easing of lockdown road map and faster rollout of the vaccine is also persuading more Northampton homeowners (especially those older Northampton homeowners who have had their jabs) to start making the first steps towards moving home in 2021.
This will mean there will be more Northampton properties available for sale in the conventionally busier post Easter market in the coming weeks and months which should cause more equilibrium and help keep Northampton property prices in check.
These are interesting times for the Northampton property market. If you are a Northampton homeowner or Northampton landlord looking to buy or let your Northampton property in the coming weeks or months, don’t hesitate to drop me a line to discuss what all the points raised in this article mean to you.property market, please don’t hesitate to drop me a line.
Northampton First-time Buyers Can Now Buy Using 5% Deposit Mortgages
Yet higher mortgage rates could see Northampton buyers paying a lot more each month for the privilege
Being a Northampton first-time buyer in the last 12 months has not been an easy thing. Just before lockdown there were 400 ‘5% deposit mortgage’ deals and first-time buyers were able shop around to get the best deal. When the first lockdown hit, 5% deposit mortgages disappeared, meaning that as many Northampton would-be first-time buyers were about to buy their first Northampton home in 2020, the rug was pulled from under their feet.
Today, you can count on two hands the number of mortgage deals which allow a 5% deposit. Even worse, the number of hoops one has to jump through to get a 5% deposit mortgage is very high (plus you have to pay handsomely for the privilege, with mortgage rates of at least 4.15%).
In putting down a 5% deposit, you borrow the remaining 95% as a mortgage. These 95% mortgages (or Loan to Value) were very popular with Northampton first-time buyers before the Credit Crunch. Nearly 1 in 6 mortgages were 90% to 95%+ Loan to Value mortgages in 2007 (15.5%), yet as the Global Financial Crisis hit in 2008/9 that dropped to only 1 in 63 mortgages being in 90% to 95%+ range in 2010 – meaning many Northampton first-time buyers were unable to buy their first Northampton home between 2010 and 2015.
Yet in the recent Budget, Rishi Sunak has vowed to back the building societies and banks so that they can offer more of these higher 95% Loan to Value mortgage deals.
Many people have said this will mean there will a Northampton house price boom – especially as Stamp Duty is extended until September
This scheme is nothing new as a practically identical scheme was launched by George Osborne in the 2013 Budget with his Help to Buy Scheme. Nearly 1 in 5 houses sold in the year after that budget used this scheme, yet Osborne’s was only for first-time buyers and it was only for brand new homes (not second-hand homes). Whilst there’s no doubt this caused an increase in house purchases, many commentators said it was a backdoor method to keep the country’s new homes builders afloat.
The big difference with this new 2021 scheme is that it’s available for Northampton second-hand homes as well and is open to all Northampton owner occupiers moving home
Yet, what will the banks mortgage interest rate charge be?
Although no building societies or banks have yet publicised what mortgage rates they will charge, all the High Street lenders including NatWest, Santander, HSBC, Virgin Money, Barclays and Lloyds have stated they intend to offer these 95% LTV mortgages.
Under the Government’s mortgage guarantee to the banks, Westminster will guarantee 20% of any mortgage offered at 95% Loan to Value. In principle, that means that building societies/banks should be able to offer the low mortgage rates as those available to people wanting to borrow 75% loan to value.
At the moment the average five-year fixed rate mortgage is 3.6% with
a 10% deposit, but if you have a 25% deposit, you can fix it for
five years at 1.63%
However, don’t forget though that the banks will be charged a ‘still to be decided’ amount to use the Government guarantee. On the last Help to Buy Scheme, it was rumoured they were charged 0.9% of the mortgage borrowed, so this cost would have to be passed on to the first-time buyer. I would suspect the eventual rates Northampton first-time buyers will have to pay will be somewhere in the region of 3%.
This new 95% mortgage/5% deposit scheme is only going to work if the banks and building societies have sensible mortgage rates as it needs to help those Northampton first-time buyers it was intended to benefit, who are finding it hard work to get on the first rung of the Northampton housing ladder.
It all comes down to how anxious the banks and building societies feel about the true long-term effect of the pandemic once the furlough scheme ends in the autumn. Only time will tell.
Yet, to give you an idea of the difference the mortgage rates scheme will make on a typical Northampton terraced/town house…
The average price paid for a Northampton terraced/town house in the last 12 months was £200,900
Assuming a 35-year repayment mortgage and borrowing that amount on each scenario:
As you can see, quite a difference.
I have to applaud Rishi Sunak for this initiative, yet will it be ‘fields of clover forever’ for the Northampton property market with the new scheme? No, it won’t.
It will be a good boost to the Northampton (and UK as a whole) property market. Whilst the mortgage guarantee offers a small portion of security for the lenders, it does focus on the riskiest part of the housing market. Many lenders still have cold shivers of the Northern Rock 125% mortgage debacle from a decade ago and those memories still ring true today.
The fact is these types of mortgages will be a higher risk, even if the Government are underwriting them with their smaller deposits, which will come through in bank’s and building societies higher pricing for these mortgages. Also, the lenders are already at near full capacity trying to get hundreds of thousands existing property sales and purchase deals through because of the Stamp Duty rush over the last 9 months. I await the rates in early April and will make comment again.
If you are a Northampton homeowner, potential Northampton first-time buyer or anyone involved in the Northampton property market and you would like to chat about anything I’ve covered in this article or any of my other articles on the Northampton property market, please don’t hesitate to drop me a line.
Northampton Home Buyers £7,020,783 Windfall as Stamp Duty Holiday Stretched to September…
...and new 5% deposit mortgages for
The Chancellor Rishi Sunak announced two initiatives to keep the Northampton property market firing on all cylinders into 2021.
Firstly, the £500,000 zero-rate Stamp Duty band has been extended to the 30th June 2021. After then it will phase down to £250,000 for an additional three months, returning to the pre-pandemic levels on the 1st October 2021. Secondly, Mr Sunak announced a scheme that will allow Northampton first-time buyers to buy their Northampton home with a 5% deposit from this April. Let me look at what each initiative means to the Northampton property market.
Coming out of the first lockdown in the early summer of 2020, there was a lot of apprehension that the British property market would flounder. Therefore, when the Stamp Duty Holiday was announced back in July 2020 to boost the property market, the deadline was set at the 31st March 2021. Little did anyone know of the snowball effect of people wanting to move because of the initial lockdown in the spring of 2020, the pent-up demand following the conclusion of the EU negotiations with the subsequent ‘Boris Bounce’ and then the Stamp Duty Holiday which made the perfect storm for what has been the busiest property market in Northampton since 2001/2.
The average stamp duty paid by a
Northampton homebuyer is £3,267
The reason the Stamp Duty extension is important is that many estate agents and solicitors have been warning for the last couple of months that home buyers would pull out of property deals or renegotiate if they could not complete their sale in time before the Stamp Duty Holiday ended.
So, by phasing down the Stamp Duty Holiday, this will allow some breathing space for burdened solicitors and mortgage lenders, thus decreasing the number of buyers pulling out of their property purchase because they unexpectedly have to find up to an extra £15,000 in Stamp Duty when property sales do not complete on time.
There are currently 2,149 properties that are sold STC in Northampton alone and the vast majority of those will save money on their stamp duty because of this extension
So, what does the Stamp Duty extension mean for Northampton house prices?
The extension has heightened confidence in the Northampton property market. The Government watchdog ‘The Office for Budget Responsibility’, has predicted that house prices in 4 years’ time will be just over 13% higher, compared to their pre-Christmas predicted figure of 11% growth (over the same time frame).
From next month, Northampton first-time buyers will be able to buy Northampton homes worth up to £600,000 with a 5% deposit and a Government-backed mortgage with a fixed rate of up to 5 years.
Rishi Sunak wants to turn the millennial ‘Generation Renters’ into ‘Generation Buyers’ and believes this initiative should be able to help two million people get on the property ladder. When we look at what that would mean for Northampton, I estimate …
6,929 Northampton people could be helped onto the
Northampton property ladder with these 5% deposit mortgages
The Government backed scheme will be open to Northampton first-time buyers for 21 months (until the end of 2022) and available from lenders including NatWest, Lloyds and HSBC (plus others to be announced soon). It will be available on all Northampton homes new or second hand (previous schemes applied to new homes only).
5% deposit mortgages were all but withdrawn from the market at the start of the pandemic in spring 2020 with an almost default minimum deposit of 10% (even as high as 15% in the autumn just gone) putting homeownership out of reach for all but the wealthiest Northampton first time buyers.
I must admit I found it a scandal that homeownership among the 25 to 34 year olds plummeted from 69% in 1981 to 36% by 2014, although with certain Government incentives and low interest rates since then, that had risen to 41% by last year, but it’s not enough
With so many young families paying huge sums in rent, who could effortlessly afford to make mortgage repayments on the same property, they haven’t been able to save enough for a 10% initial mortgage deposit, let alone 15%.
Yet now with these new 5% deposit mortgages, many Northampton first-time buyers will be able to afford to buy their first home in Northampton. Banks will typically lend between four and a half and five times the gross annual income – this means with a modest 5% deposit; many Northampton 20 and 30 somethings will now be able to buy their first home. Just before I finish this topic, the 5% deposit mortgages will also be available to current Northampton homeowners who don’t have the equity built up in their existing home – thus helping second or third (or more) time Northampton buyers as well.
How do both of these changes affect Northampton buy-to-let landlords?
I know many of you Northampton landlords are adding to your Northampton rental portfolio because of the Stamp Duty Holiday and with the extension, you too will save some money from it. The issue of first-time buyer mortgages does mean the demand for private rented accommodation in Northampton might not be as strong in the coming decade.
Don’t get me wrong, tenant demand will continue to outstrip supply of Northampton rental properties for the foreseeable future, yet the tenant/landlord balance could alter slightly in the medium term. Northampton landlords need to take a long hard look at their properties and ascertain if they are fit for purpose both now and into the 2030’s. Tenants are becoming a lot more demanding of what their rental property offers. Wood chip wallpaper, avocado green bathroom suites and kitchens fitted in the 1990’s (or before) simply won’t cut the mustard in the next decade.
The demand from Northampton tenants for properties with larger gardens, or the ability to keep pets or an extra reception room/garden office to allow them to enjoy their rented home more and also being able to work from home will ensure greater demand for your rental property … and the best bit, they will pay handsomely for that in higher rent.
If you are a Northampton homeowner, buyer, tenant or landlord and you want to discuss your options on selling, buying or renting a property in Northampton and the surrounding area, do not hesitate to contact me personally.
Northampton Pensioner Homeowners are now Worth £5,470,626,700
How wealth is distributed will always be a contentious issue, especially as the Baby Boomers (those aged between their late 50’s and late 70’s) wealth has grown exponentially over the last 20 years, compared to the wealth of the younger generation.
With most UK property in the hands of the older generation, with its total value about to smash through the £8 trillion barrier (up from £3 trillion at the start of the Millennium), is it right that so much wealth is concentrated in the hands of the older generations?
As national house prices have continued to grow unabated (for example in the last eight years by 49.9%, whilst real take home pay has only increased by 11.8%), this has meant younger people are finding it even harder to get onto the property ladder and those already on it to move up it.
Looking at the older end of the age range for home ownership …
of the 89,984 homes in Northampton, 19,121 households are 65 years or older, and 75.7% of those households (14,477) are owned (mostly without a mortgage).
A full split as follows …
I talk with many Northampton pensioners who want to move yet are unable to. There appears to be a shortage of suitable properties in Northampton for members of the older generation to downsize into. Due to their high demand and low supply, Northampton bungalows and suitable ground floor apartments achieve on average a 15% to 25% premium per square foot over two/three storey properties. Yet would it surprise you only 1% of new builds in the UK are single storey bungalows (compared to 7% 25 years ago)?
Northampton pensioner homeowners are now worth 5.47bn.
YouGov did a survey a couple of years ago and they found that just over one third of homeowning pensioners in the UK were looking to downsize into a smaller property. As I have stated before, as a nation, we need to rethink how we can encourage older homeowners to sell their larger homes to release them to the younger families that desperately need them.
The Government over the last 11 years have appeared to target all their attention on first-time buyers with a strategy such as the Help to Buy Scheme. However, this doesn’t address the long-established under-supply of appropriate retirement housing vital to the needs of Northampton’s quickly ageing population. Unfortunately, Northampton’s housing stock is sadly ill-equipped for this demographic shift to the ageing homeowners.
Also, to add insult to injury, those more mature Northampton pensioners in their 80’s and 90’s who do live in the restricted number of Northampton bungalows and suitable ground floor apartments are finding it difficult to live on their own, as they are unable to leave their bungalow/apartment because of a shortage of sheltered housing and ‘inexpensive’ care home places.
This in turn means the younger 60 to 70 year old Northampton retirees (in their bigger two/three storey family houses) can't buy those Northampton bungalows (occupied by the older retirees), which means those Northampton families in their 30’s and 40’s can't buy those larger family houses (occupied by the younger 60 to 70 year old retirees) they need for their growing families ... it’s like everyone is waiting for everyone because of the logjam at the top of the property ladder.
So, what is the solution? Quite simple – build more homes!
In the last 30 years, the UK population has grown by around 12 million people, yet the number of properties has only grown by around 4.2 million.
With obstructive planning regulations, immigration, people living longer and increased divorce rates (meaning one family becomes two) we have needed 275,000 properties to be built a year since the Millennium to just stand still and meet demand. Twenty years ago, the UK was building on average 185,000 households a year, that figure dropped in the five years after the Global Financial Crisis in 2008 to 140,000 households a year. Thankfully that has increased steadily over the last five years and last year we created 245,000 households in the UK, however we still have all those years since the Millennium to make up for.
The answer is to build on more land for starter homes, bungalows and sheltered accommodation because land prices are holding back the property market, as the larger national building firms are more inclined to focus on traditional two and three storey houses and apartments than bungalows (because they make more money from them). You might say there is no land to build the property on, yet …
only 1.2% of the UK is built on with residential properties.
So how could Northampton people make money on this news? Shrewd Northampton property investors should consider purchasing bungalows, especially ones that need some titivating (possibly after somebody has passed away). Bungalows purchased at the right price and location are a great gamble for flipping. They should also be considered for renting out as demand will only outstrip supply. This would be a start to the solution of rebalancing the Northampton property market so everyone is happier with their lot.
If you would like a chat about the Northampton property market – don’t hesitate to give me a call.
Half of Northampton Homeowners Move Again Within 4 Years and 39 Weeks – Why?
In Britain, there are 27,071,500 households, of which 17,044,450 are owned, which are worth a total of £3,925,865,212,950 (£3.92 trillion). Over the last 5 years, an average of 86,096 properties sell each month, meaning just over a million UK households move home per year. Therefore, the average British homeowner moves every 16 years 5 months.
These statistics refute a common hypothesis that British neighbourhoods are becoming more fleeting and transitory. On the face of it, they appear to show that, once you have succeeded to buy a property you can call home, there isn’t much motivation to move again.
So, aren’t people moving home so much?
Could it be put down to a certain sense of complacency or apathy to moving home? Whereas we might love our home in Northampton, most of you (including myself) still want to ‘better our lives’ with a bigger house, better area etc, which typically requires us to climb up the Northampton property ladder.
Yet with Northampton house prices having risen by 191.2% in the last 20 years, the cost of going up the next rung on the Northampton property ladder is prohibitive.
Everyone harks back to the 1980’s, when we had an upbeat booming property market as a backcloth, Brits moved home every eight years; so now with the average at just over 16 years this equates to each British homeowner moving around three to four times in their adult lifetime. Maybe we should all call our homes ‘Dunroamin’ and be done with it!
Or does it?
We have all heard the phrase ‘lies, damn lies and statistics’ … well the stats mentioned above hide some amazing features of the British property market. When homeowners get into their 50’s and 60’s, their tendency to move home drops like a stone. The average length of time a homeowner without a mortgage moves home is 24 years and 7 months (and just under 7 out of ten outright homeowners i.e. without a mortgage are 65 years old or older).
Yet, homeowners with a mortgage move on average every 10 years and 11 weeks.
So, whilst I cannot determine who has a mortgage and who doesn’t, I can look at how quickly people move home in Northampton. I have looked at the last 50 property sales in Northampton, and I have found some interesting findings.
On average Northampton homeowner only move every 12 years
and 10 weeks.
Nothing interesting about that you might say, when compared to the national average ... yet the devil is in the detail.
There appears to be a two-speed Northampton property market … look at the top 25% of Northampton home movers, and then the next slice … these Northampton people are moving home really quickly, yet the gap for the next two slices widens tremendously.
When looking at the properties that fall into the later bands (i.e. the ones that don’t move/sell so often), they tend to be the larger properties where the homeowners have lived for 25/30 years plus.
The lesson we all should learn is that once people get into their 50’s and 60’s, their propensity to move home drops considerably. This means the properties on the lower rungs of the Northampton property ladder do appear to sell quickly (as they are occupied by younger homeowners) yet once Northampton people get older, their tendency to move diminishes. This puts a roadblock on the younger generation wanting to buy the larger Northampton properties these mature homeowners live in.
What is holding the older generation back from selling and downsizing to free up homes for families that desperately need them? Some of it will be apathy, some of it will be holding on to the home that they brought their family up in, yet the bottom line is…
46.5% of the homes owned in Britain have
two or more spare bedrooms.
As a nation, we need to rethink how we can encourage older homeowners to sell their large homes to release them to the younger families that desperately need them. Some suggest tax breaks, yet the Government won’t be in the mood to give huge tax breaks as the measures to protect the economy over the last 12 months will ultimately need to be paid back.
One thing I do know, we as a Country have seen (and will continue to see) a lot of demographic change together with an increasing elderly population, so it’s not just about how many homes we build, but whether we are building the right kind of homes the older generation will want to move into.
Interesting times ahead for the Northampton property market!
If you have a Northampton property to sell or let in the coming weeks, months or years and would like to know how this and other factors will affect you and your property ... without obligation, don’t hesitate to give me a call or drop me line.
14% Drop in Northampton Homes ‘For Sale’ in Last 4 Months
What does this mean for Northampton property owners?
With most Northampton families home schooling their children in lockdown and the forthcoming Stamp Duty Holiday deadline on the 31st March 2021, less Northampton properties have been coming onto the Northampton property market since the new year. This has prompted a 14% drop in the supply of Northampton homes for sale compared to October 2020.
For the past couple of decades, like clockwork, Northampton estate agents’ busiest times for putting property onto the market is the new year to Easter rush, with a smaller flurry of new properties coming onto the market in the mid/late summer. Yet, since the ending of lockdown 1.0 in the late spring 2020, nothing has been normal about the Northampton property market.
Throughout the summer, the number of properties coming onto the market in Northampton steadily rose to its peak in October and the number of properties then becoming sold subject to contract (stc) rose even higher (and whilst statistics don’t exist for the properties sold stc, anecdotal evidence suggests there were just under 50% more Northampton properties sold stc in the last six months of 2020, compared to the same 6 months in 2019).
However, back to the number of properties for sale…
the peak of the number of Northampton properties on the market in autumn was 1,692 – that now stands at 1,455.
The first lockdown caused many Northampton homeowners to want to move with the need for extra space to work from home and in some cases larger gardens. This was further exacerbated by Northampton home movers also trying to take advantage of the Stamp Duty Holiday to save themselves money on this tax.
This meant many more Northampton properties came onto the market (more than a “normal” year) in the last 6 months of 2020. However, those Northampton home movers motivated to move for the extra space/save money on the tax, did so in the summer/autumn and have already placed their home on the market (and are probably by now sold stc rushing to get their house purchases through before the deadline on the tax savings).
So, how does Northampton compare to other property markets, and what does this reduction in Northampton properties on the market mean to Northampton homeowners and landlords?
There are 4% less properties on the market today in Northampton, compared to 12 months ago.
When I compared that to the national picture, according to Zoopla, there are 12% less properties on the market today (compared to a year ago).
However, the complete opposite is taking place in London. There are currently 47,900 apartments for sale in London compared to January 2020, when there were only 32,600 – a massive rise of 46.9% … all the more interesting when there are only 15.1% more London semi-detached houses for sale and 1.8% more London detached homes over the same 12-month period. The jump in London apartments for sale is being pushed by an upsurge of London up-sizers eager to trade their city living apartment up to suburban houses, and a small handful of panicky London buy to let investors who are wanting to exit the London property market following falling rents for apartments. Looking closer to home, there are…
25% more apartments for sale in Northampton than a year ago, whilst there are 27% less detached homes.
So, whilst there are some differences between the supply of individual types of property in Northampton (e.g. apartments vs detached houses), the overall reduction in the number (i.e. supply) of properties for sale can only mean one thing, when there is a reduction in the supply of anything and demand remains stable, this will mean continued upward pressure on Northampton house prices in the short term (although I suspect there will be some downward pressure on Northampton apartments with that level of increase in supply – maybe some interesting ‘opportunities’ for all you Northampton landlords?).
Will overall demand for Northampton property continue to be stable?
Lockdown 3.0 will probably cause another wave of Northampton people who want to move home (thus increasing demand). The last property crash (the Credit Crunch in 2009) was caused by a huge increase in the supply of properties for sale when people lost their jobs and interest rates were much higher. People couldn’t afford their mortgages and so dumped their homes onto the market all at the same time – causing an oversupply of property for sale and hence house prices dropped.
Compared to the 1,455 properties for sale in Northampton today, at the height of the Credit Crunch in January 2009, there were an eyewatering 2,169 properties for sale in Northampton.
It was this increase in the level of property for sale in Northampton (mirrored across the whole of the UK) that caused property prices to drop between 16% and 19% (depending on the type of property) in Northampton over the 12 to 14 months of the Credit Crunch. So, as long as there is no sudden change in the demand or supply of properties and interest rates remain at their current ultra-low level – the medium-term prospects for the Northampton property market look good.
If you are a Northampton homeowner or a Northampton buy to let landlord and want to chat about the future of the Northampton property market – do drop me a line.
Northampton Property Market: Is it Time to Stamp Out Stamp Duty?
Most people pay Stamp Duty Tax when they buy a property, house, apartment or other land and buildings over a particular price in the UK. The Chancellor, Rishi Sunak (quickly followed suit by the Welsh and Scottish Governments), announced last July that Stamp Duty was partially being suspended on all English property transactions up to £500,000 (£250,000 in Wales and Scotland) - a Stamp Duty Holiday.
That meant only 1 in 8 English buyers would pay any Stamp Duty Tax on their home purchase (if it was over £500,000), saving any buyer up to £15,000 in tax on the purchase. The problem is the property needs to have been purchased and bought by the 31st March 2021. Complete the transaction a day later, and those buyers will have to pay Stamp Duty.
The issue is local authorities are snowed under with local search requests, mortgage companies and conveyancing staff are working from home, so property transactions are taking much, much longer. This means many Northampton (and UK) buyers who have currently sold (subject to contract) will miss out on the stamp duty saving.
Most (not all) estate agents have been warning the buyers and sellers in their property chains that some deals might not make the 31st March 2021 deadline and pleasingly, most people aren’t moving because of the Stamp Duty Holiday (they are moving because they need extra space because of the pandemic). However, it only takes one person in the chain not to be ‘singing off the same hymn sheet’ for the whole chain to collapse … so keep in touch with your estate agent.
A campaign by one of the national newspapers and an online petition to extend the stamp duty holiday has meant the topic could be debated in Parliament in the next few weeks, after 100,000 home buyers and sellers signed that petition, asking for an additional six-month Stamp Duty Holiday. The home buyers and sellers are worried the property market will collapse after March 31st when the Stamp Duty Holiday is removed.
The last time British home buyers were conscious of upcoming Stamp Duty changes, it distorted the number of properties sold. The bigger question though is, did it change the overall number of people moving home?
In November 2015, the then Chancellor, George Osborne, announced in his Autumn Statement that buy to let landlords would have to pay an additional 3% in Stamp Duty (over and above owner occupiers) for all property bought after the 1st April 2016. As shown in the graph below, this caused a surge in property buying (which we have seen since this summer with the Stamp Duty Holiday), with many Northampton buy to let landlords completing their property purchase in March 2016, as they dashed to complete their property purchase before the tax increase.
In the 3 years of 2015/6/7, the average number of Northampton properties sold (transactions) per month was 354 per month, yet in the month before stamp duty was changed in March 2016, transactions rose to 715, an uplift of 101.8% from the average or an extra 361 transactions in that month alone. Yet, look at the months of April and May, the property transactions numbers slumped, meaning in those two months combined, there were 151 less transactions.
So, if the Stamp Duty Holiday isn’t extended, what will that mean for the UK and Northampton property market?
London and the South East seem to be particularly exposed to the removal of the Stamp Duty Tax break because it has such a high proportion of property priced between £300,000 and £500,000. These areas benefit from the highest tax savings relative to house price.
Yet, with the average value of a Northampton home at £267,000, the stamp duty cost if the sale is delayed after the 31st March 2021 is £3,350 – a figure that shouldn’t break the bank
So, if the Stamp Duty Holiday isn’t extended – it might not be such the nightmare scenario as some people believe.
My advice to all buyers and sellers is to be constantly talking to your estate agent, your solicitor and your mortgage broker. With your estate agent to ascertain if they have asked every person (or asked the other agents in the chain to ask the question), “What if we don’t meet the stamp duty deadline?” With your mortgage broker and solicitor to give them all the information they need to ensure there are no delays with any information they request from you.
One final thought, some mortgage providers allow insurance policies to be purchased by your solicitor in case your searches (from the local authority aren’t back in time) … the cost of those will be much lower than the cost of the stamp duty ... again, speak with your solicitor. Irrespective of whether you are a client of mine or not, if you would like a chat about anything mentioned in this article, don’t hesitate to contact me.
7,954 Northampton Homeowners to be ‘Unchained’ From Toxic Leasehold Agreements in Biggest Shake-up of Property Law in Decades
When William the Conqueror invaded our fair shores in 1066, like all good kings, he needed to buy loyalty and raise cash to build his castles and armies. He did this by feudal law system and granted all the faithful nobles and aristocrats with land. In return, the nobles and aristocrats would give the King money and the promise of men for his army (this payment of money and men was called a ‘Fief’ in Latin, which when translated into English it becomes the word ‘Fee’… as in ‘to pay’).
These nobles and aristocrats would then rent the land to peasants in return for more money (making sure they made a profit of course) and the promise to enlist themselves and their peasants into the Kings Army (when requested during times of war). The more entrepreneurial peasants would then ‘sublet’ some of their land to poorer peasants to farm and so on and so forth.
The nobles and aristocrats owned the land, which could be passed on to their family (free from a fee i.e. freehold), while the peasants had the leasehold because, whilst they paid to use the land (i.e. they ‘leased it’ which is French for ‘paid for it’), they could never own it. Thus, Freehold and Leasehold were born (you will be pleased to know that in 1660 the Tenures Abolition Act removed the need of Freeholders to provide Armies for the Crown!).
4.3 million properties in the UK are leasehold
… and 7,954 properties in Northampton are leasehold. By definition, even when you have the leasehold, you don’t own the property (the freeholder does). Leasehold simply grants the leaseholder the right to live in a property for 99 to 999 years. Apart from a handful of properties in the USA and Australia, England and Wales are the only countries of the world adhering to this feudal system style tenure. In Europe you own your apartment/flat by using a different type of tenure called Commonhold.
The average price paid for leasehold properties in
Northampton over the last year is £131,307.
The two biggest issues with leasehold are firstly, as each year goes by and the length of lease dwindles, so does the value of the property (particularly when it gets below 80 years). The second is the payment of ‘ground rent’ – an annual payment to the freeholder.
Looking at the first point on the length of lease, the Government brought in the Leasehold Reform Act 1967, which allowed tenants of such leasehold property to extend their lease by upwards of 50 years. However, this was very expensive and as such only kicked the can down the road for half a century (when the owner would have to negotiate again to extend another 50 years – costing them more money, time and effort).
Ground rents on most older apartments are quite minimal and unobtrusive. The reason it has become an issue recently was the fact some (not all) new homes builders in the last decade started selling houses as leasehold with ground rents. The issue wasn’t the fact the property was sold as leasehold nor that it had a ground rent, it was that the ground rent increased at astronomical rates.
Many Northampton homeowners of leasehold houses are presently subject to ground rents that double every 10 years.
That’s okay if the ground rent is £200 a year today, yet by 2121, that would be £204,800 a year in ground rent, meaning the value of their property would almost be worthless in 100 years’ time. One might say it allows for inflation, yet to give you an example to compare this against, if a Northampton leasehold property in 1921 had a ground rent of £200 per annum, and it increased in line with inflation over the last 100 years, today that ground rent would be £9,864 a year.
This is important because the majority of leasehold properties sold in Northampton during the last 12 months were apartments, selling for an average price of £129,726.
So, without reforms, the value of these Northampton homes will slowly dwindle over the coming decades. That is why the Government reforms announced recently will tackle the problem in two parts.
Firstly, ground rents for new property will effectively stop under new plans to overhaul British Property Law. Under the new regulations, it will be made easier (and cheaper) for leaseholders to buy the freehold of their property and take control by allowing them the right to extend the lease of their property to a maximum term of 990 years with no ground rent.
Secondly, in the summer, the Government will create a working group to prepare the property market for the transition to a different type of tenure. Last summer the Law Commission urged Westminster to adopt and adapt a better system of leasehold ownership – Commonhold. Commonhold rules allow residents in a block of apartments to own their own apartment, whilst jointly owning the land the block is sitting on plus the communal areas with the other apartment owners.
These potential leasehold rule changes will make no difference to those buying and selling second-hand Northampton leasehold property.
Yet, if you are buying a brand-new leasehold property, most builders are not selling them with ground rent (although do check with your solicitor). The only people that need to take any action on this now are people who are extending their lease. If you are thinking of extending the lease of your Northampton property before you sell to protect its value, your purchaser may prefer to buy on the existing terms and extend under the new (and better) ones later (meaning you lose out).
Like all things – it’s all about talking to your agent and negotiating the best deal for all parties. Should you have any questions or concerns, feel free to pick up the phone, message me or email me and let’s chat things through.
How Will the Brexit Deal Affect Northampton House Prices and Your Mortgage Payments?
Christmas Eve brought the news that Boris Johnson had conclusively agreed on a Brexit deal for the UK with the European Union. This gave optimism that the economic turmoil of leaving the EU would be radically reduced, yet what will this ‘trade deal’ do to the value of your Northampton home and the mortgage payments you will have to make?
Since the summer, the Northampton property market has been booming, yet many commentators have cautioned that the momentum cannot last. With unemployment and the end of Stamp Duty Holiday on 31st March, the Halifax reported last week that they believed UK house prices would drop by at least 2% (and in some areas 5%) in 2021.
I find it fascinating the Northampton property market has defied the doom and gloom swamping the wider British economy in the last seven months. The Northampton property market has profited from the large swell in demand from better-off existing Northampton households trying to buy larger Northampton houses (as they are required to work from home) together with the added benefit of saving money from the Stamp Duty Holiday.
Northampton house prices are 2.4% higher than a year ago, making our local authority area the 292nd best performing (of the 396 local authorities) in the UK.
With the Brexit deal being voted through in the Commons on the 30th December, many say this will boost the property market just as the Government-backed measures supporting the property market come to an end. Yet, in the face of rising unemployment due to the pandemic, the Brexit deal may do little more than avoid uncertainty for the Northampton housing market.
What will happen to Northampton house prices?
The Northampton property market in 2019 was held back because of the uncertainty of the Brexit deal. In January 2020, we saw the demand released in the fabled ‘Boris Bounce’, only for buyer and seller activity to fall off a cliff in March during the first lockdown. It then took off like a rocket once lockdown was lifted. UK house prices are 4.19% higher today, year on year (although some areas are breaking the mould, like Aberdeen whose house prices have dropped by 5.1% and at the other end of the scale, Worcester’s house prices have increased by 11.9% year on year). A lot of that growth in UK property prices has been fuelled by buyers spending their stamp duty savings on the purchase price of their new home. Yet, it cannot be ignored.
Of the 121,100 workers in Northampton, 7,600 are still on furlough (although roughly 40% of those people are still only on part-time furlough).
When the furlough scheme ends in April 2021, unemployment is likely to rise to in excess of 11%, whilst the protection for the homeowners utilising mortgage holidays will finish.
Piloting the rocky shoreline of the recession is more important than any Brexit deal for Northampton homeowners, buy-to-let landlords, buyers and sellers.
In April, the market will also be dealing with the end of the Stamp Duty Holiday, which is due to come to an abrupt halt on the 1st April 2021. Consequently, we will continue to see the house price index's show growth in the first half of 2021. They will then recede as the prices of Northampton homes purchased after the 1st April 2021 reflect the lower price paid (because buyers would have had to pay for their stamp duty again). Therefore, probably by the end of 2021, the Halifax may be correct, and Northampton house prices will be 2% to 5% lower than they are today, simply because of the stamp duty.
What will happen to mortgage rates?
The real benefit from the Brexit deal is that there will be no tariffs on most goods coming into the UK. 52% of all goods imported into the UK are from the EU (totalling £374bn per annum). The UK Government were planning to add between 2% and 10% tariffs under World Trade Organisation rules on the vast majority of those goods. Price increases because of those tariffs would have fuelled inflation, meaning the Bank of England would have to increase interest rates. Although 77.2% of British mortgages are on fixed rates (paying an average of 2.16%), eventually those increased Bank of England rates would have fed through into higher mortgage payments. To show you how vital low interest rates are …
the average Northampton homeowners’ mortgage is
£399.64pm, owing an average of £162,934.
Yet if interest rates rose only 1.5%, Northampton homeowners’ monthly mortgage payments would rise to £603.31pm, and if interest rates were at their 50-year average, then the mortgages payments would be an eye-watering £1,174.93pm (note all mortgage payment figures mentioned above are only for the interest element of the mortgage- the capital repayment element would be additional and variable depending on the length of mortgage).
As I have mentioned many times in the articles I have written about the Northampton property market, low interest rates are vital to ensure we don't have a property market crash. That's not to say just because they are at an all-time low of 0.1% to aid the economy that there won’t be some form of realignment of property prices later in the year (as mentioned above). Yet low interest rates mean people can still pay their mortgages, so there won't be panic selling. That would mean there won't be a flood of property come to the market (like there was in the 1988 and 2008 property crashes when interest rates were much higher), suggesting property prices should remain a lot more stable.
As Unemployment Hits 7.1% in Northampton, What Effect Will This Have on the Northampton Property Market in 2021?
12 months ago, the unemployment rate in Northampton stood at 2.7% of the working population, yet with Coronavirus hitting the UK, what impact will this rise in unemployment have on the Northampton property market?
As I have discussed a number of times in my articles on the Northampton property market, this summer saw the Northampton property market do exactly the opposite of what was expected when Covid hit.
The Stamp Duty holiday added fuel to pent up demand for people to move to property with extra rooms (to work from home) and gardens. This prompted a brief hiatus in the number of people selling and buying their home in Northampton over the last summer and autumn.
Yet, insecurity around rising unemployment, led to many mortgage companies becoming more cautious in the later months of summer, predominantly when lending to the self-employed or first-time buyers borrowing more than 85% of the value of the home (as they wouldn’t want to lend money to someone that could not afford a mortgage due to an insecure income or not having a job).
Back in the late spring, economists were predicting that UK unemployment would rise to a peak of 6.5% in Q3 2020, returning back to the 2019 levels (3.4%) by 2022.
As we speak (Christmas 2020), nationally the unemployment rate stands at 6.3%. The toll Covid has had on people’s livelihoods has been massive, with an additional 1,434,515 people out of work, although it is important to note this unemployment rate is still lower than the five years following the Credit Crunch years - 2008 to 2013.
So, with such a growth in unemployment and the spectre of a ‘No Deal Brexit’, this may hold back the enthusiasm of many companies to take on more staff, reducing any rebound in employment. If unemployment remains high, this will influence perceptions of employment and personal/household financial security, which are the ultimate drivers for both house prices and whether people buy and sell.
3,865 Northampton people were unemployed a year ago and today that stands at 10,025.
Looking at all the study papers on the topic, there is a link between unemployment and house prices, yet it’s not as strong as you would think. The larger factors are the demand and supply of property on the market and interest rates. Interestingly, in the past two recessions, the comparatively richer regions of London and South East house prices have been more sensitive to unemployment and house price changes than the rest of the UK, yet London and the South East also bounced back quicker and higher after the two recessions.
The concept behind this is that more expensive house prices in the South drop more than lower priced houses in the rest of the UK. Why? Because those more expensive regions have, by definition, more expensive house prices meaning the homeowners have higher mortgages, so if they become unemployed, their homes are more likely to be repossessed (because of the high mortgages), and consequently that reduces house prices in that area quicker because repossessed houses tend to sell much more cheaply compared to normal house sales.
The health of the Northampton property market in 2021 and beyond really depends on what happens to the economy as a whole and more specifically what is happening in the Northampton economy.
When we drill down though, unemployment has hit different sectors of the economy to a lesser or greater extent. For example, for office workers, people who work in tech & sciences and the professional services, the impact on jobs has been comparatively mild, with many personnel able to work from home. Yet for others, such as those who work in the hospitality, leisure, retail, entertainment and catering industry, remote working is simply not an option, and these have been hit the hardest.
Unfortunately, the industries mentioned above are the ones that tend to employ the younger generation, who invariably live in private rented accommodation, rather than own their own home. Being made redundant puts their dream of buying their first home back even further as they try and get themselves back on their feet by initially finding a job (let alone save for a deposit).
Housing markets will recover quickest in towns and cities, where jobs are in more resilient employment sectors.
For example, in London, unemployment jumped really quickly (and high) in 2009 with the Credit Crunch, yet came down just as quick in 2011, just as the property market in London started to take off, whilst in Northampton, it took a lot longer for unemployment to drop and the Northampton property market didn’t really start to get going until 2013.
If we have a determined economic contraction, with a lengthier and leisurely economic recovery, impeded by financial stress, that will lead to much higher unemployment in the 10% to 12% range in the summer of 2021. However, before I get to the initial question, I need to highlight another interesting fact, because…
What is particularly interesting is the increase in unemployment in Northampton amongst men has been higher than women, with a growth of 5.3 percentage points for men compared to 3.4 percentage points with women.
So, what is the prediction for the Northampton property market under the cloud of this growth in unemployment?
One massive redeeming factor that could just save the Northampton property market is low interest rates. This will keep mortgage payments low, meaning repossessions should be kept to a minimum (therefore, there shouldn’t be a flood of cheaply priced Northampton properties coming onto the market all at the same time and dragging Northampton house prices down with it, as it did in the previous two recessions of 2009 and 1989).
Yet, irrespective of the ultra-low interest rates, I still consider property prices in Northampton at Christmas 2021 won’t be much different from today, and in fact could be slightly lower.
This is because people have been paying top dollar in the last six months to secure their dream Northampton home, quite often spending the money they saved on Stamp Duty on the purchase price. When Stamp Duty Tax returns in April 2021, there will be less money to pay for the property ... thus Northampton property values will be, by implication, lower in a year’s time.
What about Northampton landlords and the rents?
Nationally, rents fell just over 2.3% between 2008 and 2010, following the Credit Crunch, while national house prices fell 15.9%. I anticipate Northampton rents will also remain comparatively robust in the coming months and years.
Rents are very much tied to the rise and fall of wage growth and I can’t see why this relationship shouldn’t continue. Rents will rise in Northampton by between 13% and 15% in the next five years, yet if property prices do rise in 2023/24, that means future rental yields will be marginally lower in 2023/4 comparative to today, especially as ultra-low interest rate expectations (according to the money markets) seem to be here to stay for a long time.
Therefore, something tells me there could be some interesting Northampton buy-to-let investment opportunities for Northampton investors willing to play the Northampton buy-to-Let market for the long term.
To conclude, these are just my personal opinions. If you are a Northampton landlord looking for advice and an opinion on what to buy to maximise your returns, please don’t hesitate to contact me. If you are a Northampton homeowner, looking to buy or sell and need any advice or an opinion on where the market is and where your Northampton home sits in the bigger Northampton property market picture – again feel free to drop me a line.
Will the Northampton Property Market Crash in 2021?
… and the three reasons why it will not be the catastrophic scenario some are predicting
In the last few months, the Northampton (and UK) property market has resisted and flouted every economist’s prediction. With the economy a shadow of its former self, unemployment set to hit 11.9%, the Government on track to borrow nearly half a trillion pounds to pay for Coronavirus support packages etc., all of this has had no effect on Northampton homeowner’s enthusiasm or capability to want to move home. It highlights the influence of both the emotional impact of lockdown and the enticing appeal of saving thousands of pounds on your Stamp Duty Tax bill.
For the last few months, the Northampton property market has been akin to a surfer, riding an unexpectedly large wave. The question is, will the surfer crash down (i.e. the property market) onto the rocks or will it calmly arrive at the beach unscathed? Well looking at house prices firstly…
UK house prices are 4.7% higher than they were 12 months ago according to the Land Registry, whilst in Northampton they are 1.2% higher
Looking at the data over the country, things overall are looking good for property prices. Yet it must be remembered the Land Registry data is on completed house sales and is always a couple of months behind, so this data is for house sales up to September that were agreed in the spring. Also, it does not take into account the prices being paid today on Northampton homes (as they will only show in statistics the Spring and Summer of 2021 when the sale completes).
Northampton house prices will inevitably ease in 2021
Anecdotal evidence over the last few months has suggested buyers are using their Stamp Duty savings on the price they are prepared to pay for the Northampton home of their dreams, so when the Stamp Duty holiday finishes in Spring 2021, we will see a reduction in the price Northampton properties sell for, as buyers will now have to hold back some of their cash to pay the Stamp Duty tax.
Mortgage approvals at a 13 year high
A better statistic to judge the property market is by the number of mortgage approvals. As the vast majority of house buyers need a mortgage, that is another good place to look at the numbers as they are much more up to date than the Land Registry figures. The Bank of England recently stated 97,500 mortgages were approved last month, up from the long-term average of just over 65,400 per month. This was the highest number of mortgage approvals since September 2007, and a whole third higher than mortgage approvals in February 2020 when we had the Boris Bounce in the property market.
As a country, we are due to smash through 2019’s 524,000 total number of mortgage approvals this month, despite the fact that the property market was closed for nearly three months in the spring. It’s vital to remember, that mortgage approvals do not equate to people moving home, as many of you reading this can attest to ... property sales do fall through.
I do have apprehensions that many Northampton people, buying and selling their Northampton homes and in a chain, may not be able to realise the move before the Stamp Duty rules change at the end of March 2021, as there is a massive backlog with mortgage lenders, local authorities’ and the searches, chartered surveyors surveying the property and solicitors with the legal work, all combining to slow down the house selling and buying machine.
If you are in chain at the moment, you must constantly be talking to all the parties involved and ensuring everything is focused on getting the sale complete by the end of March. You have a responsibility to get information requested back in hours, not weeks ... because if you don’t, you might not get your Northampton home move through before the end of the Stamp Duty holiday, and without that discount, someone in your chain may pull out of the sale altogether and the chain will break.
The number of people moving home in Northampton is anticipated to drop sharply after the Stamp Duty holiday ends at the end of March 2021
And that is probably going to be the biggest impact on the Northampton property market in 2021. Yes, there will be a slight readjustment in the prices paid after March 2021 (as mentioned above) yet, a reduction in the number of people selling their Northampton home does not inevitably lead to a house price crash.
Yes, there will be a number of people who have to sell in 2021 because they have lost their jobs (i.e. ‘forced sales’). In the last two ‘Property Market Crashes’ of 1988 and 2008, there were a large number of forced sales in a short period of time (because business owners had to sell their home as their business had gone bankrupt because of the Credit Crunch, as well as people who had lost their job), increasing the supply of properties coming to the market in 1988 and 2008.
This in turn pushed Northampton house prices down as the property market was flooded with lots of property to sell in a short period of time. Yet this time, we have had the cushion/parachute of Bounce Back Loans, Furlough and Mortgage Holidays over the last 9 months.
Also, another important factor about the last property market crashes were the levels of interest rates and the amount borrowed.
Interest rates are the key to the future of the Northampton property market
In 1988, mortgage interest rates were an eye watering 11.5% and 6% in 2008, meaning mortgages were much more expensive compared to the 0.1% rate we have today. Also, with 77.2% of mortgagees with fixed rate mortgages, and only 1 in 21 mortgages owing more than 90% of the value of their home (and 1 in 303 mortgagees owing more than 95% of the value of their home), negative equity should not be so much an issue like it was in 1988.
This means most Northampton homeowners are in a much better place to weather the storm of 2021, than they were in 1988 and 2008
I foresee many Northampton sellers will simply wait until activity in the Northampton property market picks up again before placing their property on to the market. This means fewer properties will be placed onto the market for sale in the later part of 2021, meaning Northampton house prices will tend to hold up. The people that will be affected by less properties coming onto the market will be estate agents, solicitors and home removals people.
I also believe there will be ‘interesting investment opportunities’ to be had for Northampton buy to let in the latter half of 2021 with the potential changes in Capital Gains Tax regulations, although those won’t go on the open market, so do keep your ear to the ground and build relationships with all the letting agents in Northampton so you get to hear of the property portfolios coming up for sale (as they tend to sell ‘off market’). Again, if that’s something that interests you – do drop me a line.
So, where is the Northampton property market heading in 2021?
Well, the Northampton property market (aka our “surfer”) has seen house price growth of 57.4% since 2009 … and this has been fuelled on the back of…
None of these things have changed because of Covid.
As a country, we have only built on average 165,100 homes a year since 2009. Supply and demand show that whilst we will probably have a turbulent choppy ride on the 2021 wave (because of the economy) our surfer (aka the property market), with long term demand for housing outstripping supply since the 1980’s, will continue to ride the wave (probably not as large as it has been in 2020) as the ultimate long-term outlook for the property market in Northampton looks good.
All this means demand for decent, private rented Northampton property will be good as long as the property ticks all the boxes of the tenants. If you are a Northampton landlord, whether you are a client of mine or not, feel free to drop me a line to pick my brain on the future of the buy to let market in Northampton.
Northampton Landlords and Second Homeowners Will Probably Save Money from the Proposed New Capital Gains Tax changes
If the proposals were adopted in full, some Northampton landlords would pay £10,000 less Capital Gains Tax than they would currently
The government borrowed £394bn this financial year (April ‘20 to April ‘21). This figure does not include the cost of November lockdowns and support measures, which means the final bill will probably be over half a trillion pounds. Ultimately these billions will need to be paid back to cover the cost of Coronavirus.
The Office of Tax Simplification (OTS) published a report for tax reform and, as was predicted by many in the press, the Government Dept suggested the Chancellor contemplate readjusting current Capital Gains Taxation (CGT) rates with a person’s own Income Tax rates. This would mean increasing the rate of CGT for selling a buy to let property from 28% to 40% for high-rate taxpayers and 45% for additional rate taxpayers. To add salt to the wound, the OTS is suggesting cutting the £12,300 annual CGT allowance.
This has led to many Northampton buy-to-let landlords contacting me in the last few weeks, wondering if this is the time to exit the Northampton buy to let property market, especially as they have been hit by growing levels of rental legislation and higher taxes.
With tax bills about to go through the roof, is this the time to leave the Northampton buy to let property market?
Yet, like all things, the devil is in the detail as Northampton 2nd homeowners and Northampton landlords may well finish up having lower CGT tax bills with these new taxation proposals, even though the CGT restructurings are being introduced to raise the much-needed cash for the Government.
Apart from the suggested cut of the annual CGT allowance and increase in the CGT percentage rates, the OTS report also proposed reintroducing rebasing and indexation. In layman’s terms, the OTS are suggesting all gains made before 2000 would not be taxable (rebasing) and any capital gains would be calibrated to account for inflation.
So, what would that actually look like for a Northampton landlord? Let us assume we have a Northampton landlord who bought a Northampton buy to let property in 2000.
Under the current CGT rules
Under the new proposed CGT rules
Under the new proposals, the CGT payable (assuming the CGT rate of 40% and a lower annual allowance of £5,000), the same Northampton landlord would only pay £37,807 – a saving of almost £10,000.
And the savings don’t stop there. Remember, under the new OTS proposals, all capital gains made before 2000 would also be tax-free.
However, let us not forget the responsibility of the OTS is to report on tax simplification opportunities, not to set Government taxation policy. None of us have a crystal ball on what Rishi Sunak will do with CGT on buy to let property or second homes. Although, as time has always taught us with investments, often the worse thing to do is to make impulsive decisions on what MAY happen.
You have to remember, CGT only gets charged when you sell or transfer your investments, and most people use their rental investments to provide their income. If you did sell up, the best 90-day building society accounts are obtaining 0.8% pa, the stock market is a rollercoaster (good luck with that) and Government 10-year bonds are paying a princely 0.324% pa … where else are you going to invest to get the income Northampton property investments provide?
Property is an asset you can touch, feel and ultimately understand. Maybe, this is the time (if you haven’t already) to take portfolio advice on your Northampton buy to let investments? Many Northampton landlords do so, whether they use our agency, another Northampton agency or you manage your property yourself. The service is free of charge, we don’t need to meet face to face as we can do it over Zoom and it’s all without obligation. I promise to tell you what you need to hear - not what you want to hear ... what do you have to lose?
The 2020 Review of the Northampton Property Market
Looking back at the Northampton property market for 2020, it can certainly be seen as a frenetic game of two halves, albeit with a very long half time in the spring. Between the General Election in mid-December and Christmas, many Northampton agents saw an unusually higher uplift in activity in the property market just as we were getting ready for Christmas 2019. Yet once the New Year festivities were out of the way, that pre-Christmas uplift in the local property market was nothing when compared to the bang on Monday 6th January 2020 with the fabled ‘Boris Bounce’ of the Northampton property market. January, February and most of March were amazing months, with the pent up demand from people wanting to move from the Brexit uncertainty of 2018/9 being released in the first few months of 2020.
The pandemic hit mid-March, and the Northampton property market was put on ice for nearly three months (as was almost everyone else’s lives). Yet at the end of spring, the property market was one of the first sectors of the economy to be re-opened. Every economist predicted house price drops in the order of 10% in the best-case scenario and 25% in the worst yet nothing could be further from the truth.
When the lockdown restrictions were lifted from the property market, those three months allowed Northampton homeowners to re-evaluate their relationships with their homes. The true worth of an extra bedroom (for an office) became priceless, as people working from home were having to take calls and work from the dining room table. Northampton properties with gardens and/or close to green spaces all of a sudden became even more desirable. More fuel was put on the fire of the Northampton property market with the introduction of the Stamp Duty Holiday, meaning buyers could save thousands of pounds in tax if they moved before the end of March 2021. This changed the local property market and now …
Property values in Northampton are set at 0.1% lower today compared to a year ago.
The fallout of that increased demand for a new home meant those Northampton properties on the market coming out of lockdown in early summer with those extra rooms and gardens were snapped up in days for ‘full’ price. Northampton buyers were having to spend their Stamp Duty savings on paying top dollar for the home of their dreams. Yet the increased number of properties coming onto the market in the late Summer quenched a lot of that demand and the prices being achieved became a little more reasonable and realistic. This increased the number of properties sold (stc), so much so that, nationally, almost two thirds more homes have been sold (stc) than would be expected at this time of year!
However, as we all know, just because a property is sold (stc), it doesn’t mean the property is actually sold. The number of people who have moved home in the last 12 months in Northampton, is as you would expect, much lower. Over the last 10 years, on average 4,376 Northampton homes have changed hands per year, compared to only 1,869 Northampton homes in the last 12 months.
So, what is a Northampton property worth today? Drilling down to the four types of homes locally, some interesting numbers appear. Looking at the table, you can see what the average property types are worth locally, and within each type, the average price paid in the last 12 months. (So, if the average price paid for the last 12 months is higher than the overall average, that means more higher priced property in that type has sold in the last year compared to the overall average – and vice versa).
Of course, these are overall average values. To give you an idea what Northampton properties are selling for by their square footage, these are those averages …
So, what about 2021? Well normally when the country’s GDP drops like a stone (as it did in the Summer of 2020), the property market follows in unison. Yet as the economy went south, the house price growth and activity in the property market went north. This would appear to be a quite remarkable outcome given that economic framework, but it is gradually becoming clear that, as far as the Northampton property market is concerned, people’s time in lockdown has been spent reflecting on what they really wanted from their home and has meant that the normal rules of the game simply do not apply…. for now.
As Northampton First-time Buyers are Being Locked Out of the Northampton Property Market – Rents Have Risen by 5.4%
With the banks reducing the number of low deposit mortgages (i.e. deposit of 10% and below) since Covid-19 hit in the spring, this has meant that the number of Northampton first-time buyers has been decreasing quickly, meaning many of those would-be Northampton buyers wanting to make the first step on the Northampton property ladder will stay in the Northampton rental sector.
This has caused demand to grow amongst Northampton renters for larger homes to ride out Covid, as they hunker down for the long haul to wait for normality to return to the property market. This has caused
Northampton rents to rise from £669 to the current £705 per month over the last 12 months, an increase of 5.4%.
Interestingly, the opposite is happening in Central London, where the rents tenants are having to pay have dropped by 3.8% in the last 12 months, as demand has dropped like a stone. It appears Central London tenants are looking to move out to the suburbs, in search of bigger homes, gardens and green open spaces. For example, the average rent for a 1-bed apartment in St. John’s Wood currently stands at a very reasonable £1,817 per month whilst a 2-bed apartment in Kensington and Chelsea is currently at an average bargain rent of £3,715 per month (yes, they might be low compared to last year, yet for us in Northampton, that still seems like a lot of money!). Also, there has been further downward pressure on Central London rents, as many Airbnb landlords have dumped their short-term holiday let properties onto the long-term rental market as the tourism in the capital has dwindled because of the pandemic.
This has been the sharpest drop in Central London rents since the summer of 2009, when the property market was still stumbling from the Credit Crunch.
This means there is a reverse of the trend of the 2010’s (2010 to 2018 to be exact), when initially the London property market was shooting up whilst the rest of the country was in the doldrums. Then, when the rest of the UK did start to rise slowly in 2013, London kicked on even further like a rocket … yet now it appears the opposite is happening.
Getting back to Northampton, according to the Land Registry property values currently stand 0.1% lower than a year ago; this is split down as follows:
Yet, do remember, these figures do NOT take into account the prices paid by desperate Northampton buyers this summer, often paying top dollar to secure the property. This will only filter through in the figures released in the spring.
So, why are the banks curtailing the number of low deposit mortgages, meaning that first-time buyers must find a much larger down payment before they are able to buy their first Northampton property?
The reason is the banks are fearful of a house price crash in 2021 (although if you recall I wrote about that a few weeks ago and the reasons why that is less likely to happen). They too are afraid of the frothy nature of the property market since the end of the first lockdown in late spring. The bank is lending its own money to buyers and no mortgage lender wants to be holding an enormous amount of these types of high percentage mortgages if house prices fall in 2021, because the bank would be saddled with negative equity and repossession on their hands (and we all know what that did to the housing market in the late 1980’s and early 1990’s as repossessions rocketed).
This can quite clearly be seen in the pricing and availability of low deposit mortgages. As the Bank of England has reduced its base rate to 0.1%, in the last 12 months 10% deposit mortgages rates have actually increased from 2% to 2.8%. Also, when lenders have been offering 10% mortgages throughout the summer, borrowers have had only a 24-hour window to commit before the lender withdraws the mortgage product from the market because of over subscription. As with all economics, if demand is greater than supply, the price goes up. That extra 0.8% doesn’t sound a lot until you realise a first-time buyer would have to pay an additional £167 per month in interest payments on a 10% deposit mortgage, assuming they borrowed £250,000.
However, it’s not all doom and gloom for first-time buyers as there are embryonic signs that the 10% deposit mortgage market could gradually be returning to normal, as I have recently heard some lenders taking up to a week for their 10% deposit mortgage offers to run out. Fingers crossed!
So, what does all this mean for Northampton landlords? Those Northampton landlords with properties with gardens and larger rooms will be seeing increased demand. The ability to have pets in the rental property is also an advantage, and depending on the property, can add a decent premium to the rent that can be charged.
One final thought though for all homebuyers in Northampton, be aware it’s going to be very challenging to get your house purchase through in time to meet the 31st March 2021 stamp duty holiday cut off if you are starting the process in November. Make sure your lender and solicitor have the capacity to meet that deadline and when you are asked for information, you drop everything to provide it. The odd days’ delay here and there will mean the difference between you getting the keys for your new Northampton home before the end of March 2021 and saving thousands of pounds in Stamp Duty Tax … or feeling a fool from the 1st April 2021 and having to pay the tax!
Each Northampton landlord could be hit by a £25,534 bill ...
and the 5 ways on how all Northampton landlords can escape the worst of the coronavirus downturn on their Northampton rental property.
With the second lockdown starting on the 5th November 2020, does this mean Northampton landlords can wave goodbye to their Northampton buy-to-let investment and see it go up in smoke on the bonfire of buy-to-let dreams, like a Guy Fawkes puppet?
With many Northampton tenants at risk of losing their jobs after the furlough scheme ends next March and as the reverberations of the coronavirus recession hit this winter, what does this all mean for Northampton landlords and what can they do to mitigate the risks?
Since the spring, most Northampton tenants and buy-to-let landlords have been protected from the coronavirus crisis thanks to the banks with their mortgage payment holidays and job support schemes.
Before the second lockdown was announced on the 31st October, it was expected, that as the furlough and mortgage payment holidays were due to finish on Halloween, there would be some serious fallout from those schemes finishing. One silver lining from the lockdown (if you can call it that) is that mortgage payment holidays and furlough have been extended, yet does all that just kick the can down the road?
The question is, what can Northampton landlords do to mitigate the financial risk on their Northampton buy-to-let investment?
Billions of pounds are being spent by the Government to help those people whose income has been hit by coronavirus. The better Northampton letting agents and self-managing landlords are supporting, guiding and helping those Northampton tenants in financial difficulty to gain a better understanding of the Universal Credit (UC) processes, systems and payment levels, to enable their tenants to pay the rent and ultimately indirectly, help their Northampton landlord. Also, if you are a Northampton tenant, and that support isn’t given when you ask, don’t forget Northampton Borough Council do hold special cash reserves for discretionary housing payments, which can be utilised to close the gap in rent between what UC pays and your current rental commitments. Also, the Government’s Money Advice Service and Citizens Advice are a good online resource for you to find out what you are entitled to.
Demand for gardens or office space means Northampton landlords will need to think outside the box. Those Northampton homes with tenants sharing (e.g. HMO’s and shared houses) might need to price their pre-coronavirus 4 bed sharing house to say maybe a 3 bed sharing house plus a work/office room and, if you haven’t already, installing a top of the range, fast and dependable internet connection could be the thing that swings it. Outdoor space and gardens are really high on Northampton housebound tenant’s wish lists, in fact I have come across some Northampton tenants demanding that new rental properties have a landscaped garden or those that bought a dog or cat for company during the first lockdown, are looking for their Northampton landlords to relax their ‘no pets policy’.
Those Northampton buy-to-let landlords with decent tenants, who find themselves in financial dire straits should consider attempting to keep them, even if their own monetary circumstances mean they have to decrease their rent somewhat over the short term. Now of course, I would expect tenants need to prove their circumstances, yet if their plight was real, surely it would be a wise choice to reduce the rent by perhaps £50 a month and support your tenants? You know they are taking great care of your Northampton rental property and rather than risk the issue of advertising your empty buy-to-let property – particularly when there is no assurance you will achieve your existing rent and ultimately risk drawn-out void periods with no rent coming in at all. What I would suggest therefore, in such circumstances, is that you create a new Assured Shorthold Tenancy agreement with a longer term with your existing tenant at a lower rent – a temporary measure but with peace of mind for both parties which can then be reviewed once that tenancy is up for renewal.
Many private Northampton landlords and a few slipshod Northampton letting agents tenant checks are somewhat lacking in their depth. Trust me, there is tenant referencing … and then there is ‘proper’ forensic tenant referencing. As certain parts of the British economy have been hit harder than others, Northampton landlords must consider when choosing their new tenants, the type of work they do or who their employer may be, to enable them to decide on their future capacity to meet their rental commitments.
There are still insurance companies offering landlord rent guarantee insurance if your tenants become unable to pay the rent. Many insurance firms removed these insurance products in the first lockdown, yet some have returned to the insurance market although insurance premiums have gone up in price. Remember to check the small print of the insurance, although you will get a lower insurance premium if you can show stringent tenant referencing (as per the previous point).
The Nuclear Option - Eviction
Northampton landlords need to be conscious that, should their tenancy run into trouble, the Government have changed the rules when it comes to eviction during the coronavirus pandemic. Going into the first lockdown, there was already a backlog in the courts and now, just before going into the second lockdown, bailiffs have been instructed not to enter rental properties in high risk Tier-2 and Tier-3 Covid-19 areas.
Eviction really does have to be the very last option. Negotiation or arbitration will nearly always deliver quicker and improved outcomes for both parties. Northampton landlords who do come to mutually agreeable arrangements with their tenants by briefly reducing the rent, or allowing payment holidays with legally enforceable pay back schedules should ensure they get the agreed terms in writing and run by a solicitor or their agent (feel free to drop me a note if you need advice).
However, if eviction is required, it doesn’t mean the tenant gets off ‘scot free’. Evicted tenants, depending on their circumstances, will either be placed temporarily into an inexpensive B&B, asked to move in with family or given one of the local authorities temporary accommodation properties, with the goal to then move them into long term council accommodation (as the chances of obtaining private rented accommodation would be slim with agent’s heightened reference checks – more of that at the end).
The Potential Cost of Evicting a Problem Northampton Tenant
The average rent for a Northampton property currently stands at £705 per calendar month.
Thankfully, evictions are very rare. Last year before lockdown, tenants from 201.4 rental properties were evicted each working day in the UK ... but if yours was one of those, that is still a potentially large cost.
Working on the basis that most evictions from the first rent not being paid, through to eviction, refurbishment of the kitchen, bathroom, carpets and décor (because often these do need sorting/replacing) were taking on average between eight to nine months before coronavirus hit, (plus the mortgage payments), this means a Northampton landlord could be hit by a £25,534 bill, broken down as follows:
What that would be now is anyone’s guess – yet it could be a lot more.
This is why it is so important to get the best tenant from day one. Many Northampton tenants, who know they wouldn’t pass the references of letting agents, are attracted to those private landlords who don’t use a letting agency, as they know their referencing checks are not as strict and may be a softer touch. That’s not to say going with a letting agent is a guarantee you won’t need to evict; it just means the chances are much, much smaller. Like anything in life - it’s a choice.
Whether you are a Northampton landlord who uses a letting agent or not and feels their reference checks are not to the standard or level you might hope or if you want a chat about the best rental guarantee insurance, then give me a call ... what have you got to lose?
Northampton House Prices 2021:
What will happen to the value of your Northampton home next year?
What will a no deal Brexit on the horizon, the end of the stamp duty holiday in March, mortgage payment holidays coming to an end, unemployment set to rise after furlough and ongoing on/off coronavirus restrictions do to the Northampton property market and the value of your Northampton home?
In the late spring of 2020, every man and his dog were forecasting impending doom on the British property market. Drops of 10% were considered optimistic as we all held our breath after lockdown was relaxed. Yet, the property market didn’t listen to the forecasters. UK property values today are 2.5% higher than they were a year ago, and more locally,
Northampton house prices are only 0.1% lower than a year ago
(and most of that loss occurred at the back of 2019)
So, what exactly is going to happen to the Northampton property market in 2021?
Well, with the end of furlough and 1.7m people still on the furlough scheme at the start of October, a number of economists are saying that unfortunately many of those furloughed will become unemployed. Unemployment currently stands at 4.5% in Q3 2020 (compared to 3.8% in Q3 2019). The Government’s independent Office for Budget Responsibility believes the unemployment rate will peak at 9.7% in early 2021, and then return to pre-coronavirus levels in 2022. In the past recessions of the early 1980’s, early 1990’s and Credit Crunch of 2009, when unemployment went up, the property market went down.
Yet, in this recession, the link between unemployment and property values may not be so direct.
So why is the link between unemployment and house prices potentially broken? It comes down to interest rates.
The reason Northampton house prices have gone up by 398.77% since the middle of the 1990’s isn’t because the labour market has got so much sturdier, nor that the economy has outperformed every G8 country, or that the UK has had less boom and bust economic cycles than the previous decades. Instead, it’s because of the fundamental and underlying decline in the Bank of England (BoE) interest rates.
High BoE interest rates equal high mortgage payments which holds everything back regarding the property market. In the 1980’s, the average BoE interest rate was just over 11%, making mortgage payments very expensive and keeping property prices dampened. In the 1990’s, the average BoE interest rate was a little over 6%, in the 2000’s just over 4%. However, in the 2010’s, it had been a really low 0.5%. Now with interest rates down to 0.1% because of coronavirus and the BoE threatening negative interest rates, there appears little threat of an eruption in mortgage repayment costs.
With mortgage payments at an all-time low of just under 30% homeowners' disposable income (compared to 48% in 2007), those middle-aged people lucky enough to still be in a job (who are mainly made up of workers whom are spending a lot more time working from home), they could be more inclined to dedicate more of their monthly income to mortgage payments than they did pre-coronavirus for a bigger garden or a move out of the big cities?
So, if unemployment isn’t going to make a huge difference to the Northampton property market, what is?
Most commentators believe a no deal Brexit will have hardly any short-term effect on the property market (apart from certain upmarket parts of central London).
The stamp duty holiday ends at the end of March 2021 and that certainly will reduce the number of Northampton people moving (as many moved their plans forward to beat the deadline) meaning there will be less Northampton people moving in 2021, yet that will curtail the supply of property for sale and hence keep Northampton property prices higher.
Next, the Help to Buy scheme, (started in 2013 and where the Government underwrites part of the mortgage for the first time buyer, meaning they can obtain a 95% mortgage) ends in April next year, yet the Tories indicated at their conference last month they would probably create ‘Help to Buy – Part 2’.
The bottom line is in the early 1980’s and 1990’s recessions, when interest rates were over 15%, obviously home owners couldn’t afford to keep up the mortgage payments when made redundant or on reduced wages, so many handed in their keys to the bank and homes got repossessed, thus exacerbating the issue with falling property values.
However, with interest rates so low, this will not be the case. I envisage that UK property prices will be between 4% to 5% higher by December and Northampton values just behind that at 2% to 3% higher, before levelling out in 2021 (although we might see a modest dip in certain sectors and types of Northampton homes depending on location and condition).
My advice to Northampton buy to let landlords is to wait on the subs bench until April 2021. Something tells me there will be some Northampton landlords who will be looking to exit the rental market after having their fingers burnt after the eviction ban has been lifted.
I also suspect those Northampton first time buyers, eager (and able) to break free the rental-rat-race will want to take up the anticipated ‘Help to Buy – Part 2’ scheme, particularly if the BoE base rate stays low. The other winners in 2021 will be low mortgage/equity rich households upsizing to the countryside or leafy suburbs to test out their boss’s promise of ‘flexible-working’.
Yet the losers will be the 18yo to 29yo renters … most likely to be made redundant and least likely to buy a home.
My advice to the Government for this cohort is to not ignore them once the country is out of this coronavirus situation. It’s all very good keeping the Home Counties Tory voting Baby Boomers happy with green belt policies and other policies to keep their property values higher, yet as the Generation X and Millennials get older and take over as the largest demographic to keep happy (for the polls), the hitherto inconceivable action of the Government levying Capital Gains Tax on your main home may come to fruition.
I mean, we have £400bn to pay back because of coronavirus … it has to be repaid and it has to come from somewhere. Those denied real access to buying their own home in the last 10 years, because of massive house price gains over the last 25 years, could vent their anger via the ballot box — if not at the 2024 General Election, maybe in 2029, when they realise that the futile housing policies of both Labour and Tories of the last 23 years have left them with enduring financial diffidence.
Maybe we should all look to the grocer’s daughter from Lincolnshire who in 1979 set out a bold vision of home ownership for everybody. Whichever political party truly picks up the batten and reframes it for the current 2020’s generation and comes up with the goods, will be the ultimate winner in this game.
Northampton Homebuyers Have Saved £802,750 Thanks to the Stamp Duty Holiday – Yet Many Could Miss Out
Northampton homebuyers and Northampton landlords purchasing residential property have saved £8-2,750 since the Chancellor reduced Stamp Duty on 8th July 2020, yet many more Northampton homebuyers could miss out.
My analysis of properties sold in Northampton from the Land Registry between the introduction of the Stamp Duty holiday on 8th July 2020 and 14th August 2020 (which is the most up to date sales data), reveals that many Northampton homeowners have saved a considerable amount of money in Stamp Duty. According to my research…
since the stamp duty holiday was launched, 128 Northampton homeowners have saved on average £6,272 each.
That’s a total Northampton property value of £41,655,163.
Mind you, it’s not all good news as I estimate 282 Northampton homebuyers risk missing out on the stamp duty savings (worth as much as £15,000 each) due to solicitors/conveyancers and mortgage lenders struggling with demand and failing to hit the 31st March 2021 deadline.
The short-term tax relief, together with the easing of lockdown restrictions, has seen demand for Northampton property soar this summer as Northampton property buyers race to move home.
Chancellor Rishi Sunak introduced a stamp duty holiday in the summer, with the stamp duty holiday due to end on 31st March 2021. Yet, I fear the combined pent-up demand caused by…
…has created a certain amount of constipation and backlog in the Northampton property market.
I know 31st March 2021 seems an age away, however nothing could be further from the truth. The average Northampton property sale was taking 19 weeks between the offer price being agreed and the keys/monies handed over BEFORE THE POST-LOCKDOWN. So, with as many as 40% to 50% more Northampton homeowners in that same sales pipeline of agreeing the offer and the legal and finance to be sorted as we speak, solicitors/conveyancers and mortgage lenders are really struggling with demand for their services, meaning the average time will increase. Hence, I believe as many as…
282 Northampton people could miss out on the
£1,768,560 stamp duty tax savings.
There is time left to sell and legally complete your Northampton property sale before the 31st March stamp duty deadline if you put the property on the market now with a realistic asking price, a decent marketing plan and razor sharp reflexes when it comes to the legal and mortgage work.
Yet with 40% to 50% more home movers in the system, those looking to sell their Northampton home should be very suspicious of agents being too optimistic on their initial asking price (many estate agents get a commission to put a property on the market, meaning they over-egg the pudding on the suggested asking price to flatter you, only to badger you to reduce the asking price weeks later).
Those wasted weeks at an inflated asking price will mean the difference between you securing a buyer and you then buying your next Northampton home with or without the Stamp Duty savings, which are up to £15,000 per home move.
And whilst many Northampton buyers seem ready, willing and able to pay top dollar prices for Northampton properties that match their changed post-lockdown home needs, speaking privately to many Northampton agents, some Northampton homeowners’ price expectations for their Northampton homes are now becoming too optimistic, meaning they will undoubtedly lose out.
We also can’t forget as many as 1 in 5 mortgage surveys are being down valued by the surveyor, meaning unless all parties are willing to negotiate, the sale falls through and the homeowner has to go back to ‘Square One’.
My best piece of advice for those currently sold and in the sales systems with lawyers and mortgage brokers is to speak to your solicitor and mortgage broker every single week and ask if there is anything you need to do to ensure the sale proceeds smoothly and expediently. Also, if you are asked for any information from your solicitor or mortgage broker in between times, drop everything and respond quickly to their request. The odd day here and there will make all the difference.
Northampton’s ‘Generation Rent’ to Become ‘Generation Buy’?
Boris Johnson has attracted both praise and horror in equal measure with a new plan for 95% mortgages to help beleaguered first time buyers to get on the property ladder, but would that expose UK taxpayers to too much risk? In this article I discuss the implications of what that would mean both nationally and locally in Northampton.
With the Northampton property market taking off due to the stamp duty holiday introduced in the summer, Boris Johnson announced at the recent Tory Conference a plan to offer first time buyers long-term low interest rate 95% mortgages (meaning they would only need to raise a 5% deposit). Yet when someone borrows more than 75%, the banks normally take out insurance in case the buyer defaults and the bank lose money if the property gets repossessed.
When the economy is good, the risk is low - so the insurance premiums are also low for the banks – meaning they are happy to lend high percentage loans. Yet, nobody could deny we are entering a period of uncertainty in the coming 12/18 months, meaning the insurance premiums for the banks have gone through the roof.
Mortgage companies have avoided riskier high percentage first time buyer mortgages since the start of the Coronavirus predicament. At the end of February 2020, there were just under 400 95% loan-to-value mortgage products accessible for first time buyers, yet today that figure stands at just 26.
Another reason for removing the number of 95% mortgages was that the demand for lower percentage loans exploded after lockdown was lifted, and with many mortgage staff still working from home, the banks and building societies focused their attention on getting those (less risky) mortgages sorted first. Therefore, they removed the higher percentage loans from their books, so they weren’t swamped with too much work ... so, one must ask, should the Government take on the risk from mortgage providers in the form of a guarantee from the Government — sparking concern among economists the Government is already burdened with debt – does it need anymore?
Yet taxpayers have been funding a similar scheme for years. The Help to Buy scheme, which allows first time buyers to buy a home with a 5% deposit (and the Government guaranteeing between 20% to 40% of the loan) has been in operation since 2013. Taxpayers are already guaranteeing £16.049bn of loans for 224,133 first time buyers, and when we look closer to home locally, since 2013 …
1,256 first time buyers in Northampton have used the Help to Buy scheme to help buy their home, relying on the Government to guarantee them on average £46,492
That means in Northampton alone, £58,393,952 is at risk if those Northampton homeowners’ default on those pre-existing Help to Buy Loans … yet the default rate is quite low.
So, should the Prime Minister be playing with the housing market? Ought he instead allow open market forces to be applied to the property market, allowing it to find its own normal and leave the mortgage providers to decide on mortgages based on risk, because all the Prime Minister will potentially achieve is a synthetic rise in property values?
Some in fact have argued it would be better to spend that
public money on delivering affordable rental properties?
However, isn’t it better in the long run for the country as a whole that British people own their home rather than rent because the Government will have rent to pay for those tenants when they retire if they are on the basic (low) state pension?
Personally, I don’t disagree with the initiative, yet all I am querying is, what are the Northampton first time buyers going to be able to buy? The Northampton property market is already quite drawn-out, as ultra-low interest rates have augmented the gap between the first home and the second home, the second home to the third and so on and so forth, so is this initiative fashioning a massive demand that will inflate property prices up the Northampton property ladder still further and ultimately lead to even more frustration down the line?
However, could this be the very thing that saves
the Northampton property market in 2021?
Firstly, with the stamp duty holiday due to finish by the end of March, there are suspicions the property market will stall. And secondly, the very popular Help to Buy scheme mentioned above also finishes at the end of March 2021. This boost instead of fuelling house price inflation could stabilise the property market.
In fact, the Government are hoping the property market will help power us out of recession. The early signs are good as the Northampton housing market has exploded as a result of the stamp duty holiday introduced in the summer. It certainly needs to as the country’s GDP only grew by 2.1% in August, down from 6.4% in July, 9.1% in June and 2.7% in May.
As a country, our GDP is still 9.2% below the levels seen pre-Covid. With the property market doing well, the country remains on course to leave recession in Q3, yet with the impending triple peril of rising unemployment (after furlough), further lockdown restrictions and a messy end to the Brexit transition period does this mean we are potentially in for an interesting ride?
Only time will tell if ‘Generation Buy’ will help save the property market, the economy and ultimately Boris? In the meantime, I think it will be a safe bet that people still need homes to live in … and irrespective of what happens to the property market, with that simple fact, the winners in all of this will be Northampton buy to let landlords.
Tell me your thoughts on this …
Northampton 2nd & 3rd Time Buyers Finding it Tougher (and Slower) to Move up the Northampton Property Ladder
Post lockdown, the need for Northampton families who want bigger homes has meant Northampton homebuyers must now pay considerably more to trade up to that larger home…
One thing that has come out of lockdown has been the inexorable movement of Northampton households wanting to upsize to a larger home. Often considered to be first-time buyer properties, the smaller 1st step on the property ladder one and two-bedroom properties are selling quite well, yet demand for those properties on the 2nd and 3rd step rungs on the Northampton property ladder (i.e. the three or four-bedroom homes) has been even greater.
This demand has been driven by Northampton buyers looking for more living space, especially those looking for an area or room to work from home (be that a bedroom, reception room or even an outbuilding converted into a study).
The average asking price of a 3 bed Northampton home is £242,400, whilst for a 4 bed Northampton home it stands at £373,700
As you can see, quite a jump for an extra bedroom! The heightened contest for 2nd and 3rd step Northampton homes for that extra bedroom has pushed demand to a record in October for those looking to take the next step up the ladder. Historically, as a family and its household income grow, the need for more space has permanently been the No.1 reason for moving home, yet now there is a new need for additional space to facilitate people working from home. This means not only do we have growing families wanting larger Northampton homes, there are also the people needing the same larger homes for space for a home office. Therefore, looking at the current stats, as you can see, the Northampton property market is doing quite well…
59.1% of all 3 bed and 56.0% of all 4 bed homes
in Northampton are sold (subject to contract)
Roll the clock back to pre-Covid and ask any Northampton homeowner who had enough bedrooms for their children if they wanted an additional bedroom, and most homeowners would say that was very much a ‘nice to have’, yet not a ‘must have’. With us all being cooped-up over the spring this year, demand for additional rooms is at a high, with those presently looking for their next larger Northampton home are probably going to find that only offers close to (if not sometimes over) the asking price will be accepted.
Even though no properties sold during lockdown, putting the Northampton (and UK) property market on hold for many months, many more people buying their next Northampton home will have more than made up for it since lockdown was lifted as the portals have stated if the UK property market remains at its existing trajectory, then the number of properties sold YTD by the end of October 2020 will be greater than YTD October 2019.
Yet all these properties sold are causing another issue. Just because a property becomes Sold Subject to Contract (SSTC) doesn’t mean the property is actually “sold”. Before going into Covid, it was taking approximately 19 weeks between agreeing a sale price (and instructing lawyers) to completing the sale. Yet, because we are nationally running at 140% to 150% of properties SSTC (than where we normally are at this time of year), many of my estate agents colleagues are having to manage expectations with buyers and sellers, and tell them that the date they are going to move will take a little longer.
The elephant in the room is that the temporary stamp duty holiday ends on the 31st March 2021
It sounds an age away, yet trust me, nothing could be further from the truth. Adding an extra month for the additional homes in the bottleneck means even if the sale of your Northampton home was agreed today, that would take us to the 3rd week in March ... that’s cutting it very close for the stamp duty holiday.
It is so fundamental for buyers and sellers of Northampton homes to work meticulously with their estate agent, solicitor and mortgage lender. For example, there are less staff in the local authorities to do the local searches, bank staff are working from home meaning mortgages are taking much longer to get approved, and conveyancer/solicitors are snowed under with work. Therefore, if you get a document that needs filling in, are asked to provide documents, pay disbursements or questions need answering, do it immediately and without delay. A day here and day there will snowball and could mean you miss the stamp Duty holiday … and that could cost you thousands and thousands of pounds.
The bottom line is that we haven’t seen this sort of pressure on the UK property market since 1987, when dual-MIRAS was abolished. Now, as we are slowly starting to come out of Covid, with many legal and banking staff working remotely or still on furlough, the perfect storm has occurred with unprecedented demand from buyers looking to move post lockdown. The best advice I can give is, as soon as you put your property onto the market, find a solicitor that has the capacity to work with you, then instruct that solicitor to start work immediately to prepare the paperwork, so once you have a buyer, things can move more smoothly and quickly. The last thing you want is to lose out on saving thousands of pounds by missing the stamp duty holiday by a whisker.
Why are Some Banks Reining in Over-Enthusiastic Northampton Homebuyers and Buy-to-Let Investors?
The Northampton property market is an enigma and chock-full of contradictions.
Notwithstanding an economic recession and forecasts of property values dropping, nobody seems to have informed the Northampton homeowners selling their homes and those Northampton people looking to buy them. As I have discussed in many recent articles on the locality, the Northampton property market is booming and property values in some sections of the market are rising, yet amidst enthusiastic reports of gazumping, there are disgruntled and malcontent grumbles about mortgage company surveyors down valuing property on survey.
However, before we talk about the banks and surveyors, let’s look at what is happening in the Northampton property market now.
Land Registry figures published last week showed unyielding evidence for what everyone in the property industry had been saying since the market reopened after a seven-week lockdown on May 13: property prices are rising.
The average value of a Northampton home rose by 0.7%
in the year to June to £263,100
Many expect the statistics to show more rises following the Stamp Duty Holiday announced in July, which unbridled a burst of buying activity in the Northampton property market. In many (not all) sectors some properties have been going for over the asking price whilst some have been going to sealed bids.
Some newspapers have even suggested a small minority of homeowners are ‘backdoor-gazumping’, which is genteelly being referred to by estate agents as ‘retuning the asking price’ - as in, the homeowner removing the property from the market, ‘retuning the asking price’ in an upward direction, then placing it back onto the market.
Conceivably enthused by these stories, some house sellers and estate agents might be getting a little carried away and placing overambitious asking prices on homes they are selling. Customarily a property with too high an asking price wouldn’t sell - yet some over-enthusiastic Northampton buyers are paying over the odds for certain types of properties.
So, let’s look at what is happening to the Northampton property market (Northampton plus 3 miles) by house type and the number of bedrooms…
As you can see, the best performing type of property in Northampton is the semi-detached house and the best-selling properties when it comes to bedrooms are 3 beds.
These are quite impressive figures for the Northampton property market, yet some of the banks are having none of it
They are looking apprehensively into 2021 when furlough/the new job support scheme ends, meaning it’s quite tough for all buyers borrowing high percentage mortgages (i.e. more than 80% to 85% of the value of the property in a mortgage).
It is even tougher for self-employed buyers (whose income is less than assured) to get those high percentage mortgages - and finally, the banks are most certainly concerned with high percentage mortgage buyers who pay over-inflated prices for property using the bank’s money… hence the down valuing (Definition of Down valuing : the buyer and seller agree a sale price, then the mortgage is applied for with the buyer’s bank and the bank’s surveyor states the purchase price the buyer is paying is too much).
One small note to Northampton landlords - I am also hearing that some overzealous Northampton buy to let landlords who are over-egging the potential rental figures on their buy-to-let purchase in order to obtain the mortgage, are also being reined in by the banks.
Now this is not a huge issue (e.Surv – a nationwide surveying firm only reported a 4% increase in surveyors having to down value property in Q2 2020 compared to Q1), yet should you be lucky enough to have multiple offers on your home, ask the agent what the overall buying position of the buyers are. You need to specifically ask what percentage loan the buyer is taking on and the position of the buyer in the chain (they have to find this out anyway by law and you have a right to know that information as the property seller if you ask).
The bottom line is the highest bidder might not be the best buyer for you. It’s true, average property prices are rising nationally, yet this does not mean you should pay over the odds for your next Northampton property.
If you would like a chat about any aspect of the Northampton property market - please do send me a message or pick up the phone.
3 Reasons That Will Make You Want to Stop Being a
Northampton Buy-to-Let Landlord
… and the six reasons that will make you want to become one
The buy-to-let market in Northampton is about to enter a challenging 12 to 24 months. Yet by looking back at the last recession and what is happening now, there are vital lessons all Northampton landlords can learn to protect themselves, and in fact create opportunities for themselves both in the short term and ultimately the longer term. For the purposes of this article, I would like to split these and look at the challenges and then the opportunities.
So, let’s consider the challenges ahead for Northampton landlords …
Overall, the impending rise in unemployment stands to encumber tenants’ ability to pay their rent, the rents being achieved and the possible Capital Gains Tax changes might mean an increase in tax paid by Northampton landlords when they come to sell their Northampton buy-to-let properties.
Lets look at these three points in greater detail. Firstly looking at your Northampton tenants ability to pay the rent; the Furlough Scheme certainly did help soften the blow, helping out 8.9 million people in May (out of 30.5 million who were eligible for it) and at the last count in early August, this thankfully had reduced to 5.3 million people (meaning 15.86% of workers are still on furlough). However, it cannot be denied the economic fallout from Coronavirus has already placed some tenants under economic strain. As the Furlough Scheme finishes at the end of October, commentators are suggesting the number of tenants either incapable of paying their rent, or requesting a reduction in their rent, is predicted to increase as we go into autumn and early winter.
The ultimate sanction against non-payment of rent is legal proceedings although guidance from the Government has recommended that landlords and tenants should work together and deplete all possible options before starting eviction proceedings. Yet many Northampton landlords are feeling the pressure as many mortgage payment holidays will be coming to a close at the end of September. Some Northampton landlords can indisputably see that their tenants are finding it tough and they are willing to work with them, but they can only make allowances go so far. Landlords aren’t running a charity and I would stress to any tenant that finds themselves being made unemployed in the months to come to apply for Universal Credit as soon as possible, which should help with their rental payments. With regard to the eviction process, the Government have changed the rules a number of times in the last few months, so if you want an update, don’t hesitate to contact me, whether you are client or not – I am just happy to help.
Secondly, it’s interesting that in central London, there has been a glut of Airbnb properties coming onto the market because of lack of tourists to rent them on a short-term let. A greater supply of rental properties has meant a downward pressure on rents in London of 2.1%. I don’t think this is so much of an issue in Northampton as
Northampton rents are 2.39% higher year on year
Thirdly, there is talk that the Chancellor, Rishi Sunak, is looking at changing the Capital Gains Taxation rules. As property is the biggest asset that most people own, this is also reason for concern for Northampton buy-to-let landlords. Currently, Capital Gains Tax on sales of buy-to-let property is levied at 18% for basic income tax rate payers and 28% for higher rate income taxpayers. There is talk the capital gains made on the landlord selling their buy-to-let property could be taxed at the landlord’s income tax rate.
Yet before you all start selling your Northampton portfolios before November’s budget, any changes in Capital Gains Tax would be immediate. That means to ensure you didn’t come foul of the potential rise in the tax, you would have to have to sell your Northampton portfolio at a ‘fire sale price’ in days and have a solicitor that could do the conveyancing in 3 weeks (whilst it is taking 19 weeks on average for buyers to sort their legal work out) and the buyer be a cash buyer because banks are taking months, not weeks to sort finance. This is just something we are going to have to take on the chin!
Let us now consider the opportunities ahead for you Northampton
As the country officially entered its first recession since 2009, uncertainty in any markets (be it property or stocks and shares etc.) causes investors to vacillate over whether or not to take the jump. Nevertheless, there are numerous indicators that appear to show this is, indeed, a good time either to become a buy-to-let Northampton landlord or expand one’s property empire and buy more property ... let me explain.
Firstly, assets (such as gold and stocks and shares) are great, yet if they aren’t producing income and cash – that doesn’t pay for your day-to-day living. Gold doesn’t create any income and many FTSE companies won’t be paying dividends for a while. Government Bonds are currently earning their investors 0.2% (no – that isn’t a typo) and the best savings accounts are achieving 1.1% with a 120-day notice period, so where are you going to invest your hard-earned money?
The average Northampton buy-to-let property
will earn a monthly return of 4.17%
Of course, deciding on the right Northampton property is crucial to get a good rental income and return. I have seen so many Northampton first-time landlords buy with their heart and not their head. Buying your own home is more heart than head but buy-to-let is a completely different kettle of fish. There is the inverse relationship between income (rent) and capital growth (how much it will go up in value in the future) i.e. as one goes up, the other tends to go down – so getting the balance for your needs is vital. Again, I can advise on that for you.
Secondly, with the stamp duty holiday and the pent up demand for people wanting to move home in Northampton (discussed many times recently in this blog), the Northampton property market is certainly very buoyant at the moment, yet even the most optimistic agents say it cannot last. Whether the market goes pop or has a slow and steady puncture, the market will cool in 2021. The recession will mean some people are less able to afford a mortgage. This means that if Northampton property values do ease off in 2021, you may be able to get a great buy-to-let deal if you are planning on becoming a Northampton landlord or expand your property empire as an existing landlord.
Also, if the property market does find property prices realign to a new normal in 2021/2, house sellers may find it difficult to get a good price on their Northampton home during a recession, meaning many house sellers may be more agreeable to sell their property at a lower price.
Third, if people aren’t buying, they still need a roof over their head and the council aren’t building any council houses, meaning the private sector will need to take up the slack.
Rightmove reported tenant demand grew by a third in
May 2020 when compared to the same month in 2019
Therefore, if you are still unsure about becoming a Northampton landlord, knowing that more Northampton people want to rent should help you feel more comfortable as the risk of ‘running out’ of renters interested in your Northampton property is minimal. Yet again, please don’t go buying any old Northampton property, as it’s fundamental that you make a good investment from the start in order to see a good return on your investment.
If Northampton property values do fall in 2021 (as in 2009),
tenant demand for Northampton property will only go up
Fourth, the Government reduced Stamp Duty with the sole aim to benefit the property market. The purchase needs to complete by the end of March 2021, which means you will need to have bought the property by November at the latest (as obtaining finance and legal work is taking at least 19 weeks). A word to the wise though, that whilst the saving in Stamp Duty delivers some up-front saving for those buying a buy a let property, don’t get carried away and use that saving in the purchase price you pay. Certain sectors of the Northampton property market are seeing some very inflated prices, meaning if you go into battle for a show home quality semi-detached house within a stone’s throw of the best school, you will be fighting against buyers who want it for themselves and are prepared to pay top dollar for it, meaning some landlords could end up paying more for a property. My advice, if you want to save on the Stamp Duty, there are bargains to be had – you just have to know what you are looking for (again, as mentioned in point 1 – I am here to help on that whether you are a client of mine or not). The other option would be ‘just hold back’ until after 31 March 2021, when Northampton property prices could ease.
Fifth, reports that the mortgage lenders are imposing stricter conditions are true, yet even during Covid, many lenders are seeing buy-to-let landlords as a safer option to lend their money to. In June alone, the number of buy-to-let mortgage products rose by 19.2% (to just over 1,700) meaning if you have a decent deposit of 30% upwards, you are likely to find something that fits your needs (at the time of writing this article, the Birmingham Midshires had a buy-to-let 5-year fixed rate mortgage at 1.94% and Santander at 2.04% ... this is cheap money in anyone’s language). Mortgage rates are ever becoming more economical, which is a great motivation for anyone wanting to get a foot on the Northampton buy-to-let property ladder.
Finally, words cannot portray the feeling of being able to see and touch one’s investment like the sensation of bricks and mortar. Buy-to-let investment has to be seen as a long-term investment yet, for many, that is a source of financial security. Of course property values might go south next year (but they might not!) whereas there may be intervals where it’s more problematic to sell because property values will be too low, as is normally the situation throughout a recession, there will also be times where Northampton landlords will make a nice profit when selling their buy-to-let homes. Like all things in life – it’s all about the timing.
Northampton property values are 185% higher than 20 years ago
If you’re looking to invest but are not interested in stocks and shares (and you understand that your money may be tied up for a while) then the Northampton buy-to-let market could be for you.
To conclude, buying the right Northampton property at the right price to start with, presenting the property in the best way to get the best tenant, fully checking out and referencing the tenant to ensure they have a good track record of being a good tenant that doesn’t trash the property and has always paid the rent on time in the past and then finally, managing the property to ensure your property complies with the 200+ legislations and regulations of rental property, so you can sleep well at night … all to ensure the property is returned at the end of the tenancy to you in good order is what nirvana looks like.
Of course, buy-to-let does come with some risks and challenges, but it’s all about mitigating those risks. Also, there is no denying that buy-to-let also comes with a lot of opportunities as well. If you are a landlord with another agent or even a Northampton landlord that manages the property themselves, feel free to drop me a message, email or pick up the phone and let’s chat about your personal goals when it comes to buy-to-let … because what have you got to lose? Surely 15/20 minutes of your time to get great insight and inside track is worth it?
Remember, the choice is yours!
The Northampton Property Market Post-Lockdown - The First 100 Days
With around 1 in 5 Northampton house sellers actually selling their home in the last month, Northampton sellers and buyers will need to continue to be pragmatic if the surprisingly strong current levels of activity in the Northampton property market are to be sustained.
To start, we had the once in a lifetime event of the credit crunch in 2008, we then had another once in a lifetime event with the Brexit vote in 2016 and now the mother of all ‘once in a lifetime’ events, Coronavirus in 2020 – three once in a lifetime events in the space of 3 Olympic Games!
The doom-mongers forecast that the British property market would drop like a lead balloon on the scale of the 1989 housing crash (where property values dropped by 30.87% in a couple of years) but would be nothing compared to the tsunami that was Covid. Yet in the first 100 days of the property market coming out of lockdown, behavioural and economic changes mean that many Northampton homebuyers are now even more dedicated to moving home and the Northampton property market is doing quite well.
Going into lockdown, the effect on activity in the Northampton property market during those two months was expectable and predictable as it was placed in suspended animation during April and May. When the Northampton property market re-opened in mid-May, nobody predicted what happened next. Of course, many of us in the property industry estimated some release of pent-up demand from the Boris Bounce, yet nobody anticipated such a ricochet in activity in the Northampton property market.
This is particularly interesting when one considers GDP dropped by 20.4% in Q2 2020 (fascinating when compared to notable historic times when it dropped by 13.8% in WW2 and 16.7% in WW1), yet amidst the largest contraction in the UK economy ever in a single quarter, what wasn’t expected was an increase of potential property buyers and property sellers wanting to move post lockdown.
Some have cited this boost to the property market on a number of factors. Firstly, we have had the Stamp Duty Holiday, others have pointed at the never seen before 0.1% Bank of England base rates making mortgages cheap, then we had the furlough scheme which protected so many jobs and finally, the pent-up demand from the Boris Bounce.
Yet, when one actually talks with Northampton buyers and sellers, whilst all of them cite one or two of the above reasons, all of them mention and talk about how the lockdown has made them re-evaluate and reconsider how they want to live, their work-life balance and where they want to live. This is also reflected with tenants changing their requirements when looking for a property to rent (so Northampton landlords - be aware of this).
Demand for apartments in the centre of Northampton has eased off, whilst demand for property with a good-sized garden or other outside space has increased. One question we get asked all the time is also the broadband speeds, although they are quite decent in Northampton (the average broadband in our local Council area being 61.4 Mbps download and 10.2 Mbps upload).
So, with record numbers of Northampton properties coming on to the market - is it boom time for Northampton homeowners?
Of the 1,049 properties that have come onto the market in Northampton over the last month, only 188 of them have agreed a sale (a percentage of 17.9%)
That means around 4 in 5 Northampton people that have placed their property onto the market have not found a buyer yet.
Yes, the Northampton property market is good, yet the number of people who have placed their property on the market has also gone up. Northampton estate agents have never been so busy putting property on the market and I feel sorry for the chap who is putting up all the for-sale boards – his wife hasn’t seen him in daylight for weeks!
But that does mean you are in competition with so many other properties on the market (the number of properties coming on to the market typically at this time of the year is about a third to half less). The Stamp Duty boost ends in March 2021, so that means you need to have found a buyer by November at the very latest. By overegging your asking price, to test the market, might mean you will lose out on this hiatus and could end up missing the boat!
The prices being achieved for the Northampton properties that have been selling have been fair and realistic and have stood up much better than many were originally predicting.
Yet as the country looks forward, given the ambiguous nature of the outlook for the British economy and the possibility that Covid-19 may be with us for a little while yet, I must implore Northampton property sellers to be realistic with their asking price so a greater number of you who want to make the move, are able to do so.
Northampton Millennials Moving Back in with Mum & Dad?
Roll the clock back 20 years and any self-respecting late 20/early 30 something would never say on their first date that they lived with their mum and dad. It was seen as a sign of immaturity being tied to your mother’s apron strings as a failure to leave the family home. Yet over these last two decades, the age of leaving home has been increasing steadily from 20 years and 11 months in the late 1990’s to 22 years and 7 months today.
However, as with all the stats, the devil is in the detail. Although the age of leaving home has only risen by 8% between 1997 and today, those that didn’t leave home in their early 20’s tended to stay much, much longer.
In 1997, 11.26% of 25yo to 34yo still lived at home with their parents,
yet last year that had risen to 15.74%, an increase of 391,000
‘stay at home’ Millennials
However, before we deride these Millennials for still being tied to their mother’s apron strings, I would say those very same Millennials (the mid 20’s to 30-year olds) have been pragmatic, being attracted to sacrificing independence in order to achieve their long-term life goals as they have seen rents rise and an inability to save for the mortgage deposit. All of this has seen the first-time buyer levels in this millennial age range rise for the last three years … so good news for everyone!
However, is all that about to change?
Just as mum and dads in Northampton had thought their late 20 something/early 30 something offspring had flown the nest, Covid-19 has blown some Northampton ‘chickadees’ back into the nest. Back in March, the lockdown saw many Millennials flee the big UK cities, with their constrained and poky shared HMO’s and flat shares, swapping their city centre private rented home for their parents’ Northampton home.
Yet with lockdown lessening, it isn’t just remote workers who are unenthusiastic and disinclined to return to the big cities (fearful of a second lockdown) — many of these Coronavirus blow-ins are deciding to stay put too! A recent YouGov poll asked Millennials of private rented homes what their plans were and 1 in 6 tenants planned to hand their notice in on their rented home and fly back to the nest of mum and dad. The advantages are quite plain, especially as it could enable them to save for a deposit to buy their future home.
There are 89,984 households in Northampton, made up of 27,432
single person households and 54,936 family households
(the remainder being made up of shared houses etc.)
Yet how many of those Northampton family households had non-dependent children before Covid-19?
7,611 Northampton households have children
that haven’t flown the nest
That’s 13.85% of Northampton families whose kids are still to leave home … and it’s only going to get worse!
So, what does this mean for Northampton homeowners and Northampton landlords?
It will mean that Northampton parents and their children will get to know each other better, build stronger relationships and it will enable their children, if they are wise, to save for their deposit for their first home purchase - who knows maybe in Northampton, as working from home could become the norm.
Also, with remote working, many tenants are looking for properties with bigger gardens which could translate into greater demand for property with bigger gardens? It will also change the property needs of those Northampton parents and potentially could mean instead of those parents moving down market, they could end up staying longer or moving up market?
Now of course these polls could be a load of hot air? What I do know is that this thing has not played out yet and only time will tell if this will make a concrete change to the way people live, rent and buy property.
These are interesting times and thank you for reading this. Do let me know your thoughts on this matter.
The 9,085 ‘Trapped Landlords’ of Northampton
Going into lockdown in March, the Government proclaimed a ban on tenant evictions, pledging that no tenant in a private rented home, who had lost their wages due to Covid-19 would be kicked out of their private rented home until the late summer. Fast forward to August and the press were being briefed as late as Wednesday 19th August that this freeze in evictions in England and Wales would cease on the 23rd August. That was until just after 4pm Friday 21st August when Mr Jenrick, the Housing Minister, announced that the eviction ban would be extended for a further four weeks and also buy to let landlords must now give their tenants six months notice to gain possession.
Cue crocodile tears for all the 9,085 Northampton landlords
Not so ‘snappy’ with piping your eye there. I know many Northampton landlords became landlords between 2000 and 2009 because they preferred bricks and mortar to investing in the stock market or gilts/bonds market. All they were looking for was a small pension income to top up their meagre state pension. Not all Northampton landlords are akin to the 21st Century Rising Damp version of Leonard Rossiter with his ‘Rigsby-esqe’ or even ‘Rach-manism’ wicked landlord ways. Official estimates suggest there are 1.8m to 2.1m landlords in the UK, the vast majority doing the right thing by their tenants, many of whom have helped their Northampton tenants in financial trouble during Covid-19 by acquiescing to short-term rent reductions or rent-payment holidays.
Also, many Northampton landlords have mortgages (in fact, if we added all the UK buy to let landlord’s mortgages, they would add up to £216.65 billion). The Government and the Bank of England have applied political influence on the mortgage companies to be a little more flexible and sympathetic on landlord’s mortgage interest payments, yet the mortgage interest is still adding up. The issue is, some tenants are in arrears with their rent, meaning landlords aren’t receiving their rent, which means many buy to let mortgages aren’t being paid either.
So, how many tenants are in arrears? The National Residential Landlords Association stated that just 3% of landlords recently surveyed reported tenants are in arrears. This was backed up recently when Goodlord stated …
3.72% of tenancies in the UK are in arrears
These are only slightly above the pre-Covid arrears levels, yet still a strain for the landlords involved. Also, the two-month notice period of the section 21 Notice has been extended to six months, meaning it will be March before any tenants are made to leave, even if the notice was issued now.
So, does this leave Northampton landlords trapped?
With regard to the arrears, only 1 in 17 landlords rent their property through a limited company, meaning the rest (i.e. the vast majority) rent their property as a person, thus giving themselves unlimited personal liability should their rental portfolio fail (i.e. the mortgage company could make a claim on the landlords own assets, including their main residence, if the property was repossessed and the shortfall wasn’t made up). Also, if the building society’s and Banks turn against the Government advice and are too lenient with landlords with buy to let mortgages, there could be situations where the rental properties are repossessed, meaning the tenant will be made homeless.
I am particularly concerned about the fate of the
2,552 self-managing Northampton landlords (i.e. they don’t use an agent)
They should seriously consider taking out rent guarantee insurance to protect themselves against any potential defaulting tenants (so many don’t). Reasonably priced rent guarantee insurance products, even on existing tenancies are still available to landlords via agents, even in these Covid-19 times (whether you are a client of mine or not do not hesitate to pick up the phone and have a chat or send me an email). Whilst the policies aren’t inexpensive – they do give you peace of mind with the rental payments.
One thing that this does also remind me of is the 2008 Credit Crunch. There were an awful lot of Northampton homeowners who were unable to sell their home in 2008/9, so they converted their Northampton property into a buy to let investment. There are going to be an awful lot of Northampton landlords who will also want to sell in the next six to nine months, yet are unable to do so until the middle of next year without having to take a hit on the value of their home. For those Northampton landlords that can relate to that, maybe we should chat to consider your options so you can mitigate any losses?
It seems Northampton landlords have been used to saving the Government from a PR disaster of homeless tenants on the streets at Christmas, the least we should do in the country is stop disparaging landlords and lift them up from their pariah status.
Northampton landlords are housing 38,901 Northampton
people in private rented accommodation…
… and so it is my opinion that the contributions made by these Northampton landlords should be recognised. My fear is always of a danger of a widening schism between the landlords and tenants. Truth be told, both need each other, and I hope the Government extend help to landlords as they have with tenants, otherwise the Government won’t have any homes to house the British people if all the landlords decide to sell up. It is especially important that the supply of private properties doesn’t drop in Northampton going forward when you consider…
Northampton needs an additional 6,823 private rental homes by 2029
In the meantime, the Government have bigger fish to fry sorting out the economy as a whole, so if you are a self-managing landlord or even a landlord with another agent in Northampton, feel free to pick up the phone or make contact with me and we can discuss your options without any obligation. There is no need to feel trapped, there are options for you and it is better to consider them now - set the foundations and motions going in the right direction promptly before it becomes a bigger issue in the future.
1,554 Northampton Properties Sold in Stamp Duty Holiday Bonanza
On the 8th of July 2020, the Chancellor announced the first £500,000 of any property bought was exempt from stamp duty until 31st March 2021. This also included buy to let landlords (although they would still need to pay the additional 3% stamp duty level for second properties). Talking to many of you Northampton homeowners, I know lots of you are bringing forward your home moving plans to take advantage of this tax cut. Also, many Northampton portfolio landlords are looking to save paying the tax by bringing their portfolio purchases forward. Yet how do you ensure you sell and buy your Northampton property whilst the tax cut applies (a saving of up to £15,000 of stamp duty on your next Northampton home?).
The biggest issue whenever you are selling your Northampton property is the properties that you are in competition with. Plenty of Northampton homeowners have jumped onto the stamp duty holiday bandwagon since the announcement and there are 13% more properties for sale in Northampton than there were during lockdown. The number of properties for sale in Northampton can split down into type…
So, now you know what you are up against, what do you need to know?
The most important factor is the time issue. It currently takes on average 17 to 19 weeks between a sale price being agreed and the keys being handed over, meaning you need to have found a buyer before the end of November or early December to enable you to complete the sale by the 31st March 2021. That means you really need to have placed your property on the market by the end of September and early/mid-October at the very latest to take advantage of the stamp duty Holiday. Don’t get me wrong though, you could put your Northampton property on the market after that date, yet the price you will be able to achieve for your property could be affected.
There are 3,072 properties on the market in Northampton,
of which 1,554 have sales agreed on them
Talking of price, or more specifically the asking price. There is a window of opportunity for Northampton homeowners to take advantage of this stamp duty tax cut, yet don’t let local estate agents curry favour with you by tempting you with a high initial asking price to win the right to put their for sale board outside your Northampton home.
A Which report stated in 2017 that many estate agents routinely over inflated the asking prices of the properties they brought to market. One might ask why this is an issue for Northampton property sellers, as surely, they can just reduce their asking price at a later date? The excellent report proved that those estate agents who on the face of it appear to be doing you some kindness by endeavouring to get more for your home with a suggested higher asking price, the property often ended up selling for much less than similar properties that were realistically priced properties from day one and also, they ultimately took longer to sell!
This Which report compared the original asking price with final selling prices for 370,000 properties to ascertain how many estate agents had reduced the initial asking price of properties in order to sell them. Which found that 70,300 (19%) of all 370,000 properties sold had to be reduced by at least 5% in order to get the property sold, whilst the other 81% (299,700) had no or very minimal reductions to get them sold.
Of the 299,700 sold properties that weren’t reduced or reduced by less than 5%, the average initial asking price was £261,000, yet they eventually sold for an average sale price of £260,000. For those 70,300 homes whose asking prices were reduced by over 5%, whilst the average listing price was £266,000, their eventual sale price was only £241,000, a loss of £20,000 each. Even worse, those properties with the heavy price reductions (5% or more) took an average of nine weeks and one day longer to sell (when compared to the other properties with no or minimal reductions).
What that means is by over inflating your initial asking price of your Northampton home, it will cost those Northampton homeowners an extra nine weeks to find a buyer and they will lose out on the final sale price by some considerable margin (meaning you will also probably lose out on the stamp duty holiday).
Assuming your asking is price is realistic, you aren’t out of the woods yet. Other things that will help you get the best price for your Northampton home in the best possible time (and thus save you money with the stamp duty holiday) are …
The final piece of advice I can give you is if you are planning to sell your Northampton home, make sure your Northampton estate agent can show you proof of similar Northampton properties and what they actually sold for to back up their suggested asking price. If the asking price isn’t realistic, the chances are you end up losing many thousands of pounds and wasting everyone’s time. If you would like to chat about selling your Northampton home, please do not hesitate to pick up the telephone.
Northampton OAP Homeowners to Face £15,349 Coronavirus Tax Bill?
The Government is on track to borrow £400bn because of Coronavirus and that needs to be paid back at some stage. Last year alone, before Coronavirus, the Government brought in £824 billion in taxes whilst they spent £887 billion, meaning they had to borrow £63 billion. In fact, the last time taxes were higher than spending in the UK was 1998, meaning since then the country has been living beyond its means.
Interestingly, whilst these are certainly eye watering numbers (£400bn is a lot of money in anyone’s book) most people aren’t too concerned in the short term. Because interest rates are so low, the Government are able to borrow this money at 0.39 percent per annum over a 10-year period on the Gilt Markets. There are even 3-year Government gilts at a negative interest rate. This is because the UK has been considered (and still is considered to be) a monetary sanctuary/safe haven for the last 20 years because of the country’s robust credit worthiness. Cheap money – yet it still needs paying back in the years to come and that can only be funded by taxpayers.
Ultimately, the Government will have to try to balance the books and that means increasing taxation. I know many will say there is waste in the NHS and MoD procurement, but that has already been squeezed quite hard during the Credit Crunch crisis and years of austerity. Some have suggested stopping the triple lock on pensions, which costs the Exchequer £6bn a year more than if pensions had risen at pre triple lock rates, so that isn’t going to make much of a dent in the debt. Some have suggested we could enter into a second wave of austerity, like we saw from 2010, yet neither the voters nor the wage frozen public sector would accept that. That leaves tax rises as the only option for leaders who claim to take a responsible long-term view of the economy.
The Government could raise tax on spending with VAT increases, but they did that in 2011 when it rose to 20% (from 17.5%). Also, increases in VAT affect the poor more than the rich. Then they could raise it from earnings (Corporation Tax, Income Tax and National Insurance) yet it’s been proved raising these ‘earning taxes’ ends up being counter-productive to the economy, resulting in tax receipts going down (even though the tax rate went up). Both are unsatisfactory, not least because big rises end up being unfair to someone.
So, some ‘think tank’ groups have suggested that we look to unearned wealth and the equity people, especially the older generation are sitting on in their homes, to pay for Coronavirus. Whilst I am in no way promoting and advocating that idea, I thought it was a fascinating suggestion and wanted to know what that would mean for Northampton homeowners if such a fanciful idea took hold?
OAPs in Britain sit on £1.425 trillion in
housing equity in their own homes
The average length of time an OAP homeowner has been in their property, according to official figures, is 24.7 years, meaning on average, 75.8% of that equity is profit. So, if say a capital gains tax of 10% was placed on any profit, it would raise £107.84bn over the next 20 to 25 years. So, what would that mean to Northampton OAP homeowners?
Northampton OAP homeowners own £4.504bn
worth of property
Taking into account the average length of time those homeowners have been in their Northampton home, that is an ‘unearned’ profit of £3.407bn, or £1.803bn after inflation. Some ‘think tanks’ have said that should be taxed as some form of capital gains tax.
To give you an idea, if every OAP homeowner in Northampton had to pay a 10% capital gains tax when they (or their descendants) sold their Northampton home, that would cost them £15,349 each (or a total of £340.73m).
So, is this the answer to pay for Coronavirus? There needs to be tax reforms to protect the public finances yet is it fair to tax previous capital gains? Many people say no. Let’s not forget people buy their homes out of taxed income, then pay Stamp Duty, VAT on any improvements and inheritance tax if the property value is more than £675,000, so is it fair the Government want another slice of pie?
The older generation who bought these homes saw mortgage rates of 19% in the late 1970’s and 16%+ in the early 1990’s, meaning for every pound borrowed, they ended paying back £3 to £4 when you added up the interest. Also, let’s not forget all the money spent on keeping up the maintenance - money that has already been taxed. The upshot will be this would stop OAP’s selling their homes because it would discourage older people from trading down to a smaller home in retirement, making it even harder for younger families to find a big enough home to live in. Also, many people use the equity in their home to pay for retirement care, so if some of that is going to keep the debts down, that means the Government will have a larger social care bill in future years.
One school of thought could be taxing future tax-free gains for ALL homeowners, although given the Tory’s dependence on the more mature middle class (homeowning) voters, this might be a step too far for the Conservatives, so some have said this will be kicked down the road for Labour to sort. Sir Keir Starmer, who appears to be quite a straight-talking and even monetarily responsible Labour leader, is certainly a lot more voter friendly to the British electorate than Corbyn.
At the 2024 General Election, he could introduce what appeared to be a smart agenda of tax increases on unearned property capital gains and as long as it was presented in a clearly defined way, maybe turning the tables on the famous Tory General Election poster from 2010, when the Tory’s mocked Gordon Brown for doubling the national debt, implying it was Labour’s fault for the increase in national debt when in fact it was the Credit Crunch that caused it.
Starmer could soberly state Labour were the only party that could be trusted to make hard decisions to avoid burdening future generations with the £400bn ‘Tory’ coronavirus debt
One way or another, this £400bn (or £14,440.43 per household) is going to need to be paid back eventually; that means a rise in taxes. Nobody likes paying more tax - yet the truth of the matter is there is a lot of wealth tied up in property, especially with the older generation and so I suppose its introduction is inevitable in the future.
Please tell me your thoughts on the matter…
What’s Next for the Northampton Property Market?
There is no doubt that Coronavirus will affect the Northampton property market, but just how?
The ensuing economic challenges are going to impact the Northampton (and UK) property market, yet no one knows the real answer. The newspapers eulogise different opinions, but that's all they are – opinions and everybody's got a different opinion. The truth of the matter is we don't know and won’t know for another few months at least, if not more?
There have been some outstanding Government supportive measures both for tenants, landlords, home buyers and sellers (including a pause on evictions for tenants, and for landlords and homeowners, mortgage payment deferments and stamp duty reductions to make buying a home cheaper), and whilst these are only temporary, they have done their job, meaning there is a good level of activity in the Northampton property market.
A lot of that is pent-up demand from a couple of years of uncertainty because of Brexit. Also, we had the General Election in late 2019, so there have been so many reasons for people to sit on their hands. At the beginning of 2020, it was like a water hose ready to burst with the Boris Bounce in January and February. Then, just as things were beginning to get going in the Northampton property market, we had everything freeze up for months during lockdown. Since lockdown has been lifted …
the Northampton property market is open once again for business
and there is unquestionably some impressive activity both in
the sales and rental market
So, back to the original question and where are we going? I think what we will see is a subtle change to where people want to live because of the pandemic. People working from home has shown that the need to be in the big cities has reduced and as employees have realised, they can work very efficiently from home, plus they are happier and have a better work/life balance. Their employers are also happy as they get more work out of their staff and can reduce their costly office footprint in the cities. The same goes for Northampton tenants as they are wanting more from their rental homes. Three trends we have noticed is there is greater demand for properties with gardens, greater demand for Northampton landlords who will accept pets (as they now can have them as they work from home) and finally, tenants willingness to pay top dollar for ‘top of the range’ properties, whilst more basic and uncared for properties without all the ‘bells and whistles’ need to go for a discount. There certainly has been a flight to quality.
Yet, what worries me is the fundamental future uncertainty in 2021 and beyond. What will things look like, say in spring 2021, when the Stamp Duty reductions are phased out? Any property sold needs to have completed by the end of March 2021 to take advantage of the tax holiday, meaning you need to have sold your Northampton property by November 2020 at the very latest to ensure your property purchase and sale deal goes through in time (as it is taking on average up to 17 weeks between sale agreed and completion). This is where the difference between a great solicitor, brilliant estate agent and awesome mortgage broker compared to average ones will show. Good ones, when all three are working together for you, can get the sale through in 6 to 8 weeks, not the national average of 17 weeks, meaning if you are cutting it fine, you might not be able to take advantage of the tax savings in the spring. Give me a call if you want to know who the best of the best in Northampton are to ensure you don’t lose out on those tax savings.
The value of the average Northampton home
currently stands at £235,600
So, what is going to happen to the Northampton property market? It really depends on the economy as a whole and of course the property market is a large part of that. I know one thing that buy to let landlords and home buyers don't like is ambiguity and the British housing market has always lived and breathed on emotion and sentiment. People will only buy and sell property (and borrow the money to make those transactions happen) when they feel good. Are all these things like Stamp Duty holidays just putting off the inevitable? Are we heading for the mother of all property crashes?
Well, let me put sentiment and opinion aside for a second and look at the simple facts.
We have an increasing population,
yet we don't build enough houses
Since 1995, we have built on average 150,200 properties per year. The Barker Report said 2004 the country needed 240,000 per year to satisfy annual demand for new homes and whilst the number of new homes built in the UK last year rose 1% to a 13-year high, only 161,000 homes were built. That means over the last 25 years with the difference between actual homes built and the targets set out in the Barker Report, we have an inbuilt shortage of 2,245,000 homes, meaning …
since the Millennium, property values in
Northampton have increased by 154.2%
Other factors have contributed to that. The average age of a person leaving their parents’ home in the UK is 24.4 years and that has been dropping for a few years meaning more homes are required. People are also living longer (in 2000 the average person lived until 77.7 years and now it’s 81.1 years – doesn’t sound a lot until one considers for each additional year the average person lives in the UK, we need an additional 356,500 homes). Finally, we have got immigration. In the year ending March 2019, 612,000 people moved to the UK (immigration) and 385,000 people left the UK (emigration) – meaning a net increase of 227,000 people (or a requirement of c.100,000 homes to house them in one year alone). All those factors in themselves mean…
we have more demand for Northampton property than we have
supply and that's not going to change any time soon
Property markets are driven (like all markets) by supply and demand so I believe Northampton property values can only rise in the long term. The question is whether Northampton people will have the sentiment and confidence to borrow money on a mortgage and invest in Northampton property, yet at the moment with ultra-low interest rates, borrowing money to buy a home has never been so cheap and if you are in it for the long-term (which you should be with property) then I think it's good news.
One piece of good news is that mortgage lenders are willing to lend up to 90 per cent loan to value mortgages for first time buyers (and in some rare cases 95 per cent), albeit with a lot of strings attached ... yet this is a good sign as the banks and building societies wouldn’t be lending at these levels if they were too scared.
Investing in property, be it for yourself to live in or buy to let is a long-term game. We might see an uplift in prices in the short term because of the demand mentioned above, then again, we might see a dip in 2021 - yet again for the reasons mentioned above - until we start to build new homes to the scale of 300,000+ a year (something that has never been achieved since 1969), the long-term picture appears to be good. Be you a Northampton landlord, Northampton house seller or Northampton buyer, you have to be a lot more strategic and thoughtful about what you are going to do. If you would like to pick my brains, drop me a message on social media or pick up the phone.
So, those are my thoughts, tell me your thoughts for the future of the Northampton property market?
Every Northampton Homeowner & Landlord to Receive up to £5,000 Grant for Roof Insulation & Double Glazing from September
The Chancellor announced on Wednesday 8th July in his mini Budget some interesting news for Northampton homeowners and Northampton landlords. Rishi Sunak is going to give ‘The Green Homes Grant’ of up to £5,000 to cover two-thirds of the costs of environmentally friendly upgrades to your Northampton property, with the homeowner covering the other third. There are also enhanced grants of £10,000 for the poorest households where 100% of the cost will be met by the Government.
This is nothing new mind you. The coalition Government in 2013 announced The Green Deal. That deal was in theory to have been a help for the builders, energy saving and home improvement industry, as the Government hoped many would take up environmentally friendly improvements to save energy (and ultimately greenhouse gases). Yet by the time it was brought to an end two years later only 14,000 households had applied, costing the taxpayer £238m (or £17,000 per household). That doesn’t sound good value to me – yet who am I to comment?
Anyway let’s not be negative, as improving our homes does makes sense – after all, research shows Brits have the draughtiest homes in Europe. A recent survey suggests UK homes “leak” heat up to three times more quickly than more energy-efficient homes on the continent.
Data from 80,000 smart thermostats across the EU were reviewed to measure how quickly a home at 20°C inside cooled once the heating was turned off (when the outside temperature was 0°C). Within 5 hours, the average British home dropped by 3°C, the French came in second at 2.5°C yet the Germans came in at just 1°C, meaning British homes clearly need more heating (i.e. greenhouse gases) to keep them warmer.
The chancellor has allotted £2bn to the scheme, which pays for two thirds of the cost of the upgrade and stated that more than 650,000 homes would be upgraded. This could save those households a total of £195m a year in heating bills (or the equivalent of £300 a year per household), cutting greenhouse gases and saving jobs in the construction industry. The grants can be applied for from September and is open to Northampton homeowners and private sector Northampton landlords. Applications must be made before March 2021 and the Treasury have stated about half of the fund would go to households with the lowest incomes (how low is still to be announced), with an enhanced grant of up to £10,000, saving them up to £600 per annum each on their heating bills.
The average Northampton home annually produces 3.644 tonnes of CO2 , compared to the national average of 4.101 tonnes
Due to the particular individual nature of the properties in Northampton and their construction type, with suitable improvements in insulation, double glazing and draught proofing, Government statistics state that this could be reduced to 2.204 tonnes for Northampton homes if suitable work (as per the Green Homes Grant) was carried out.
Why is this important? Well UK householders spend £34.735bn a year on their electric and gas bills – this is a lot of money. In fact, looking specifically at Northampton properties …
Northampton householders spend £589.83 per year on
heating their homes (compared to the national average of £669.34 per year)
Yet, if Northampton householders carried out the energy improvements that ‘The Green Homes Grant’ suggests their energy bills for heating alone would reduce to £453.63 per year ... quite a saving over a decade and beyond (enough to buy a decent holiday – whatever one of those is!).
So, with Northampton homeowners and Northampton landlords being able to spend the grant on loft, floor and wall insulation, low carbon gas boilers, heat pumps, double or even triple-glazed windows, energy-efficient doors and low energy lighting … everyone should win – the environment, the economy and household budgets. More details on the scheme should be released by the Government in August.
Northampton Homebuyers & Landlords Set to Save £6,466,820 in Stamp Duty Over the Next Nine Months
The British are infatuated with owning their own property and politicians know that. Margaret Thatcher used it as a vote winner in 1979 when she allowed council house tenants to buy their own home. Coming to the present day, Boris Johnson’s Conservative government have anxieties that the Brits have not been buying nearly enough homes lately and, as with all countries in the world, the British property market was put ‘on ice’ for several months to help contain the Coronavirus, exacerbating the problem.
The Chancellor, Rishi Sunak, announced on Wednesday plans to boost the property market by momentarily scrapping Stamp Duty Tax (a tax paid by homebuyers) when they buy a property that costs less than £500,000.
Interestingly, Stamp Duty was originally introduced in 1694 as a way to raise funds for The Nine Years' War (1688–1697) against Louis XIV of France and applied to property and some legal documents.
Why is this important? Well the Government recognise that when the property market is working well, the economy also tends to work well, yet one of the barriers to people moving home is Stamp Duty. Even before Coronavirus, Brits were moving 40.21% less than they were at the start of the millennium, and now with this dreadful situation, the natural reaction is for people to stay put in their own homes, meaning another potential nail in the coffin for the economy.
Stamp Duty has raised not an insignificant £166.53bn since 1998, impressive when you consider the NHS costs £129bn per annum. Looking at more recent figures, the Government currently raise £1.045bn per month from Stamp Duty Tax and this statement will remove a good chunk of that from the Chancellors coffers each month, yet the Government knows a healthy property market will help the wider economy.
As Stamp Duty is a transaction tax, it restricts labour market mobility, making people who are thinking of switching jobs think twice before moving. Stamp Duty also holds back elderly homeowners from downsizing to smaller homes, which is an issue for the UK, as we don’t have enough homes to meet supply and also curtails first time buyers as it forces them to use some of the savings on the tax, as opposed to using for a deposit.
Before the changes, the Stamp Duty thresholds were as follows:
- Zero percent up to £125,000
- Two percent of the next £125,000 (the portion from £125,001 to £250,000)
- Five percent of the next £675,000 (the portion from £250,001 to £925,000)
- Ten percent of the next £575,000 (the portion from £925,001 to £1.5 million)
- 12% of the remaining amount (the portion above £1.5 million)
and between the 8th July 2020 and 31st March 2021
- Zero percent up to £500,000
- Five percent of the next £425,000 (the portion from £500,001 to £925,000)
- Ten percent of the next £575,000 (the portion from £925,001 to £1.5 million)
- 12% of the remaining amount (the portion above £1.5 million)
Landlords and Buy to Let Landlords will also benefit from these reduced rates, yet will still have to pay their additional premium for second homes (as they have since April 2016).
To give you an idea how significant this is, if these rules had been in place exactly a year ago for Northampton properties purchased under £500,000 (i.e. between 8th July 2019 and 31st March 2020).
Stamp Duty would not have been paid on 2,635
Northampton properties, worth in total £652,719,700
Anyone buying any home in Northampton over £500,000 are also winners in this, as they will save having to pay the first £15,000 in stamp duty (under the old scheme). This is because during these 9 months, stamp duty is only paid on the difference over £500,000 (so if you buy a property for say £620,000 – one only pays the stamp duty on the difference between £620,000 and £500,000 i.e. £120,000).
I’m all for reducing Stamp Duty, which is imposed progressively at higher rates the higher a property costs (as you can see from the tables above). Yet, short-lived changes to property taxation risk warping the property market and generating a ‘property market hangover’ in Spring 2021. I am part of a group of 2,500 estate and letting agents from the UK, and most of us were running at 150% speed before this announcement, coping with the post Coronavirus explosion in demand.
Now it seems that the ‘feast’ will continue until the end of March 2021 as many more people will move to take advantage of the cut in tax. However, some are suggesting this could lead to ‘famine’ down the line as it will stop people moving into the late spring and summer of 2021.
History tells us different stories on the influence on transaction volumes from changing Stamp Duty rates. In 1991 the Tory’s raised the Stamp Duty threshold at which house buyers started paying and Gordon Brown did so in 2008 when we went into the Credit Crunch. More recently, both George Osborne and Philip Hammond fine-tuned Stamp Duty so that landlords had to pay an additional Stamp Duty Premium after March 2016 whilst first-time buyers pay less Stamp Duty and the purchasers of more expensive homes (over £1.5m) pay more.
The Stamp Duty changes for landlords in 2016 affected the property market only for a short while and by the autumn, transactions levels had returned to normal. However, in 1991, John Major’s Stamp Duty change encouraged home buyers to bring forward home purchases but nevertheless the property market ground to a standstill again once the benefit ended (although the steps up the 1990’s Stamp Duty levels were much harsher as the tax applied to the whole purchase price, not the margin steps as it had in the 1990’s).
So how much money will Northampton people save when buying a home under £500k?
The average Stamp Duty paid by those Northampton homebuyers in the 9 months between 8th July 2019 and 31st March 2020 was £2,454
Being objective, I can see why the Chancellor could see this as a suitable way to motivate spending because when people move home, they are more inclined to spend comprehensively on property renovations and the services of solicitors, home removal people, tradesmen and estate agents. So, drastically reducing Stamp Duty will undoubtedly help the UK economy, or at least contain some of the damage from the Coronavirus.
Also, the experience of being in lockdown will have confirmed to many Northampton people that they need a bigger home or one with a bigger garden. I also suspect other people may be able to work from home on a more long-lasting basis, meaning there could be a shift from the larger cities to outlying towns and even a move to the countryside.
So, these are my thoughts, what are yours?
The Northampton Post Lockdown Property Market
What have we learned in the first month?
From talking to most of the Northampton estate and letting agents and our own findings, it might surprise many of you that new enquiries from homebuyers, tenants, landlords and home sellers have been at record levels since lockdown was lifted from the property market in mid-May.
There are a number of reasons for this. Firstly we had the pent-up demand for Northampton property from the Boris Bounce in January and February. Next, many Northampton people were planning to move this spring yet were prevented doing so because of lockdown, and finally, surprisingly, an advance wave of home movers seeking to bring their Northampton moving plans forward because of a fear of a second Covid-19 wave later in the year.
So, what does all that look like and how does it compare to the last 12/18 months?
Data from Yomdel, the live chat and telephone answering service for a quarter of UK estate and letting agents, is able to track objective and more current information from across the UK on what is really happening. Each week, they are dealing with thousands of enquiries including:
They have created a rolling weekly average of those enquiries for the whole of the UK for the 62 weeks before the country went into lockdown. Then they compared that 62 week average with specific time frames, namely the 10 weeks of the run up to the General Election, the 8 weeks of Post Boris Bounce in January and February 2020, the weeks of lockdown in March, April and early May and then finally, from mid-May, the post lockdown.
You might ask why tracking estate and letting agency enquiries is so important?
Enquiries in letting and estate agencies are the beating heart of the property market – they are the ECG machine of the estate and letting agency. Of course house price data has it’s place and is lauded by the national press as the bellwether of the property market, yet it takes 6 to 9 months for the effects of what is happening today to show in those house price indexes, whilst these enquiries are what is happening now.
Have a look at the data in the graph and table, it can be seen in the 8 weeks up to the General Election, every metric was down. Next, the post Boris Bounce saw house seller and house buyer leads increase yet note how low tenant enquiries were (hardly any change from the run up to the election), everything dipped during lockdown as expected, yet look at all the metrics post lockdown … amazing! (e.g. if a number in the graph/table below is say -25%, that means its 25% below the rolling 62 week average, yet if it were +20%, then that would mean it would be 20% more than the rolling 62 week average)
The numbers speak for themselves!
So, what is happening in the Northampton property market? Well, there is plenty of activity in the Northampton property market, yet that doesn’t mean everything is back to normal. Enquiries are an important metric, yet another way to judge the health of the property market is to look at the number of property transactions (i.e. people moving).
Now the Land Registry data isn’t quite as exhilarating, yet it is less volatile. Nationally, it shows that property transactions were at their lowest level since its records began in April 2005. The seasonally adjusted estimate of UK residential property transactions in April and May 2020 was 90,210, 53.4% lower than the 193,500 transactions of April and May 2019. Again though, this was because of the restrictions on moving during Covid-19. The stats for Northampton are still to be released yet rest assured I will share them in due course.
Looking again at what is happening now, when I look at the number of properties for sale…
416 Northampton properties have come onto the property market in the last 14 days alone, and of those, 61 are already sold subject to contract
So, what of the future of the post-lockdown Northampton housing market? While a stern recession seems almost guaranteed, a housing market crash is not. Many newspapers are predicting property values to fall in 2020, then rise reticently from the ashes in 2021. The fact is, nobody knows. The property market is driven a lot by sentiment. Buying a home is not like buying stocks and shares – it’s a home to live in … and those Northampton landlords who are looking for an investment opportunity, often let their heart rule the head (again sentiment) when investing in property.
Property always has, and always will be a long-term investment. Many of you Northampton people reading this, especially potential Northampton first time buyers, have been putting off buying your first home because of Brexit, now its Covid-19, and in a few years, it will be something else. There will always be ‘something else’… and you could get to your 50’s and 60’s, still renting, waiting for the ‘next thing’ to pass before you buy … and end up buying nothing.
Nobody knows what the months or years ahead will bring ... yet what I do know is, people will always need a place to live. Please let me know your thoughts in the comments. Tell us what your experiences are as a Northampton landlord or homeowner, tenant or buyer so we can all learn from each other.
Is This the Beginning of the End for Buy to Let in Northampton? …. and should Northampton landlords & Northampton homeowners be worried?
In 2019, the private rented sector accounted for just over four and a half million households or 19.9% of UK households, no change from the year before. Interesting, when compared to the proportion of private rented households in the 1980’s and 1990’s, when the proportion of private rented households was stable at around 9.5% to 10.8%.
Most of that growth in the private rented sector came in three main spurts. The first growth spurt was between 1999 and 2003 and that was caused when property values were increasing at 20% per annum, the second came from the migration of 1.69m people from the EU8 countries after 2004 and the final growth spurt came about because of the property crash of 2008/9. When I look at the local stats…
6.1% of Northampton properties in 1991 were privately rented,
whilst the most recent stats stand at 17.7%
Apart from social housing, the other pillar of home tenure is owner-occupation. Owner occupation is made up of two separate groups: outright owners and those who own their home yet are buying the property with a mortgage.
In 1991, 20.4% of Northampton households owned their property outright and 50% of Northampton households were buying with a mortgage, whilst current stats show 25.4% of Northampton households are outright owners and only 37.5% are buying their Northampton home with a mortgage
Looking at these numbers, two things are clear-
So, on the face of it, everything looks rosy for Northampton buy to let landlords with the private rented sector growing ever upwards.
This is not the case though, because these stats on private rented and homeownership on Northampton are from the last census. However, the Government have a number of in-depth annual surveys on the property market and since 2016, the proportion of privately rented properties has remained stagnant at between 19% and 20%. Also, over the same time frame, the proportion of homebuyers with a mortgage has increased quite considerably from 30.7% of all households nationally to 35.5% last year. This increase is mainly attributed to an increase in first time buyers.
So, why have we seen an increase in the number of first-time buyers?
Firstly, the government introduced their Help to Buy Scheme in 2013 helping first time buyers get on the property ladder with interest free loans and mortgage guarantees. Secondly, the wide availability of 95% mortgages since the mid 2010’s (meaning first time buyers only need to find a 5% deposit), and finally the continued increasing reliance of deposits from the ‘Bank of Mum and Dad’ have helped to support this growth.
Interestingly, age is an important factor in these stats, as it’s the 25 to 35-year olds that have seen the biggest increase in home ownership, yet it’s decreased for those in the 35 to 45-year old bracket.
So, what does all this mean for Northampton landlords and Northampton homeowners?
In the next six months, I believe the growth in first time buyer numbers will ease slightly. The pent-up demand of the Boris Bounce in January and February has now been released, and whilst the early signs are very good, we are still to see the effects of the curtailing of the furlough scheme on the people’s ability to move home.
Many doom-mongers were predicting the banks would remove 95% mortgages after Covid-19, yet looking on a well-known comparison website, at the time of writing, there were 183 ‘95% mortgages’ available to first time buyers, with eye watering low rates of 1.53% with the Halifax on a 2 year fixed rate and 5 year fixed rate with the Skipton at 1.83%. The Bank of Mum and Dad might be a tougher nut to crack for first time buyers’ deposits - the fall in the FTSE and the repercussions this will certainly have on older households’ pensions income may restrict its availability.
This means even though the Northampton property market is doing reasonably well, Northampton homeowners wanting to sell shouldn’t get carried away and ‘over-egg’ their asking prices. The information available today at all buyers’ fingertips means your property can so easily be overlooked as being overpriced, and thus become ignored.
My advice to Northampton landlords is, even though the proportion of private rented properties isn’t growing, in real numbers it is, as we created 230,000 residential homes in the country last year alone, so we aren’t seeing a mass exodus out of private renting.
Yet, now might be the time to consider spending money on upgrading what you already own instead of buying another property. Depending on the type and location of your Northampton rental property, the return on investment of certain upgrades can be in the order of 20% to 30% per annum. Don’t fall for the trap many Northampton landlords fall into and upgrade without speaking to a property professional. Whether you are a client or not, I am always here at the end of the phone to give you my advice and opinion.
Please do let me have your thoughts on the matter – thank you in advance.
Are Buy to Let Landlords to Blame for Northampton’s Housing Crisis?
Isn’t it funny that nobody boasts they are a buy to let landlord anymore? Roll the clock back to the early millennium and you couldn’t go to the local golf club or shop at a Waitrose without someone dropping buy to let into the conversation as easily and as often as the weather.
Yet now, Northampton buy to let landlords have almost pariah status, as they place a brown paper bag over their head when they enter a letting agency, lest they be recognised as such. They can easily be recognised though, as the average age of a UK tenant is 32 years old, whilst the average age of a UK landlord is between 40 and 61 years old.
Joking aside, if it wasn’t for buy to let landlords – Northampton and the UK would be in a rather difficult position when it comes to housing our local people. Many people believe that if you take buy to let landlords out of the loop of the UK property network, then it would be the land of milk and honey for first-time buyers priced out of the market. Those Northampton landlords provide those Northampton tenants with a mixture of homes to live in and using market forces, ensure the right number of Northampton homes are available. In fact, the stats show that…
Northampton buy to let landlords provide 15,921 Northampton homes for 38,901 Northampton tenants
Yet the retort from many tenant organisations would be that Northampton landlords are wealthy middle -lass people, voraciously exploiting the failing Northampton property market for their profit and greed. Of course, the demographic of an average Northampton landlord is they tend to come from more fortunate backgrounds, with 3 in 4 of Northampton landlords aged between their late 40’s to late 60’s and 4 in 10 having a degree level qualification.
It also wouldn’t surprise anyone to learn that those who invest in buy to let Northampton property are likely to be better off than those who have not yet been able to buy a home. Yet, that is the nature of the country we live in and it’s a consequence of a competitive free market economy (the alternative didn’t go too well in Soviet bloc). Indeed, asserting that the buy to let landlords represent a transfer of wealth and money from tenants to landlords is like saying that the pub represents a transfer of wealth from drinkers to the pub landlord.
Don’t get me wrong, the tax loopholes for landlords up until 3 or 4 years ago were a little ‘too’ generous, still these were closed by the Tory’s themselves. However, should the Government try to place even more burden on landlords like some are suggesting, forcing them to sell, I am certain some Northampton first time buyers would find it cheaper to buy their first Northampton home. This is because they wouldn’t be in competition with Northampton landlords to buy the starter homes both types of buyers crave, meaning house prices would drop (simple economics would dictate that).
Yet, if the supply of Northampton privately rented homes contracted at a greater rate (because landlords were selling up) than demand, this would make renting more expensive (again simple economics) for the vast majority of Northampton tenants who were still renting a Northampton home. Irrespective of whether property values dropped, it might take years for a tenant to save for a deposit, whilst for the rental properties the landlords wants to sell, the tenants only need to be given two months’ notice to leave so the property can be put on the market.
One might ask why don’t the local authorities build more council houses?
Well, Government funding has been tight because of the Credit Crunch deficit since 2009 and going forward because of the current situation with Covid-19, it will get even worse. In fact, of the 617,230 new homes built in the country over the last 4 years, only 8,270 or 1.33% were built by local authorities, meaning only just over 1 in 100 of all new properties built in the last 4 years were built by the local authorities.
This is important as the number of people in rented property has been growing over the last 20 years. In fact, when you look at all the tenants in council and private rented accommodation locally…
33.7% of Northampton people live in a rented property
Interestingly, the demographic of a council house tenant is totally different to that of a tenant in a private rented home. The average age of a council house tenant is 52 years old (compared to 32 years for a private rented tenant), so it appears the older generation have the upper hand on council houses. So again, who exactly is going to house the people of Northampton, especially the younger generation that can’t afford to buy?
Local authorities haven’t got the money, housing associations get their money from central Government, so the only other source of housing is private landlords. The problem existed before private landlords filled the gap. No doubt many Northampton landlords have certainly gained from the problem, especially between 2000 and 2007, yet at the same time, they have helped home millions of people.
Consequently, are Northampton landlords greedy and selfish? For most law abiding Northampton landlords, who look after their tenants and their properties really well, nothing could be further from the truth… and yes they have made some money – yet if you take into account property maintenance, mortgage finance, taxation, agent fees, surveys and inspections – it’s really not the gold mine many think it is.
Not until all the political parties stop using the housing issue as a political football will this issue be sorted. For example, it makes sense to allow mass building in the South East, again driving up supply and making property more affordable, yet that would wind up the Tory voting home county heartlands. It’s a shame because we do have the room to build more homes, in fact…
Only 1.2% of the country has houses built on it
The country needs a massive root and branch change to sort things out, yet I have grave misgivings that any politician has the stomach or the political resolve to do anything about it.
If Covid-19 does affect the confidence in the property market that will in fact be good news for Northampton landlords, as long as the Government doesn’t put its big ‘size 9’s in to the rental market by taking even more money out landlords pockets.
Historically, ambiguity in the property market typically results in an expansion in activity in the private rental market. Prospective home movers will rent in between selling their home and buying the next one, while budding first time buyers typically postpone their purchase and stay in the private rental market for marginally longer … which all increases demand for rental property.
Is This a Good Time to Buy Your First Home in Northampton?
Should you wait to buy your first home in Northampton or buy now? What sort of mortgages are available? What sort of deposit is required? These are questions all Northampton buyers are asking at the moment, yet this week I would like to focus on Northampton first time buyers and what it means directly and indirectly to Northampton homeowners looking to move up the Northampton property ladder and Northampton buy to let landlords.
Well quite frankly, to answer that question it’s contingent on what Northampton property you are looking to move into and even more significantly, how long you are hoping to live in that property.
We have many armchair economists and even professional economists predicting Armageddon when it comes to the property market, yet the Northampton (and UK) property market is essentially very sound. Don’t forget the Chancellor himself, George Osborne warned that if we voted to leave the EU two things would happen. Firstly, the UK property market would crash and property values would drop by 18% in the two years after the vote. Secondly, there would be an ‘economic shock’ to the country’s economy that would increase the cost of mortgages (through increased interest rates as there would be a run on the Pound). UK GDP rose by £132bn in the two years after the referendum and interest rates actually dropped locally, with regard to property values …
Northampton house prices rose by 14.2% in the 2 years following the Brexit vote
Lloyds have predicted an enormous 30% fall in property prices over the next 36 months whilst Savills have suggested a short dip of 5% during the summer, based on very low transactions numbers, with property prices bouncing back to be just over 15% higher in 5 years’ time. This assumes that the UK plc economic downturn is short & sharp, and that no substantial gap opens up between supply and demand in the property market (i.e. everyone doesn’t dump their property market all at the same time).
Northampton Property Values after the 2008 Credit Crunch crisis plummeted 15% between 2008 and the end of 2009.
Yet, the circumstances of the 2008/9 property crash were fundamentally different to today. Many ‘armchair economists’ assume there will be a re-run of the 2008/9 and 1988 property crashes in the coming 12 months in terms of house value falls. Yet, dissimilar to the last recession, this dip has not been led by previous years of strong property price growth like the other two crashes. House prices in many parts of the UK have been down in the last 12 months.
You would think Northampton first-time buyers who have already saved their deposit could grab a bargain in the coming months, you would believe they would have less competition in the market because of landlords holding back buying additional rental properties. This is because of the press speculation that rent arrears are sky high from tenants who are unable to pay their rent. Yet evidence from many professional bodies in the private rental sector state rent arrears across the whole of the Country are appearing to be very low indeed, despite Covid-19.
Interestingly, the firm Yomdel who handles ‘web live chat’ and ‘phone support’ for thousands of estate and letting agents have reported national activity is higher than the two months of the Boris Bounce (in January and February 2020). The number of new buyer enquiries for the last two weeks is double (108.9% higher to be precise) than the 2019 yearly rolling average. New landlord enquiries are 32.1% higher than the 2019 average and tenants are 150.1% higher than the 2019 average ... these are all great signs and go against the doom monger economists.
My best advice to all Northampton property buyers is, be they second time buyers, first time buyers, landlords … whatever number buyers, they should buy with a medium-term view of future Northampton property values, instead of an expectation of always looking to making a quick few pounds flipping a property (i.e. selling it quickly).
Let’s not forget that mortgage interest rates are another important factor: they are at a 325-year low, so borrowing money has never been so inexpensive. If you know you are going to be living in your first (or second) Northampton home for five years and you want the peace of mind of knowing precisely what your mortgage payments will be, then it’s very attractive. At the time of writing, Barclays are offering any first-time buyer a 95% mortgage on a 5-year fixed rate of 2.95%. The average value of an average terraced house in Northampton is £199,400 and so with the 5% deposit of £9,000 on a 35-year term the …
Mortgage payments on a typical Northampton terraced house would only be £727 per month (i.e. much cheaper than renting)
Many lenders are lending money even if you are on furlough, yet you may find you won’t be able to borrow as much pre Covid-19. Interestingly, some mortgage companies will even take into account total income, where your employer is topping up the Government’s furloughed amount, whilst other lenders will consider mortgage applications on a case-by-case basis. The best advice I can give is, don’t assume what you can or can’t borrow. Speak to a whole of market mortgage broker, to see what is possible – not what your friend on Facebook tells you, what you can or can’t borrow.
You only need to put down a 5% deposit for the property you would like to buy
If you think about it, it’s inconsequential if Northampton property values drop or not, or if they do drop whether they bounce back quickly (or not as the case maybe) because it’s impossible to know the bottom of the property market. I would say if you find the right Northampton property for you, at the price that feels right, that will be your home together and you are going live in that Northampton property for the next five to ten years, it’s not a bad time to be buying. It is like waiting for the next piece of tech – there will always be a better model or an assumed better time. We are talking about your home here – a home for you and your partner and family, be that your kids, dog, cat, pet or favourite pot plant because …
Spending money on rent is all wasted money – at least when you buy your own home, you start to pay your mortgage off from day 1
So many first-time buyers use the Bank of Mum and Dad to help with their deposit, yet I have spoken to many parents who wouldn’t want to interfere in their mature children’s life and subsidise day to day expenditure, yet are embarrassed to offer their help with the deposit. If you don’t ask …you don’t get!
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